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EnglishIn contrast to the traditional static approach to indexation, this paper analyses the dynamic consequences for real wages of the mechanism that links nominal wages to inflation. Revisiting a contribution by Dehez and Fitoussi on macroeconomic fluctuations, I analyse a monetary overlapping generations small open economy in which full indexation is interpreted as the occurrence of a dynamic ‘quasiequilibrium’. In the suggested framework, the nominal wage is linked to the inflation rate by a specific indexation formula whose shape relies on unions’ bargaining positions. Assuming a constant peg for the real interest rate and the superneutrality of money, I show that the economy has a unique long-run quasi-equilibrium allocation whose stability depends only on the behaviour of the monetary authority. Moreover, I show how the operating of a ‘wage-spiration effect’ might lead to the persistence of involuntary unemployment.
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| Titolo: | Nominal Wage Indexation, Quasi-Equilibria and Real Wage Dynamics | |
| Autori: | ||
| Data di pubblicazione: | 2010 | |
| Rivista: | ||
| Abstract: | In contrast to the traditional static approach to indexation, this paper analyses the dynamic consequences for real wages of the mechanism that links nominal wages to inflation. Revisiting a contribution by Dehez and Fitoussi on macroeconomic fluctuations, I analyse a monetary overlapping generations small open economy in which full indexation is interpreted as the occurrence of a dynamic ‘quasiequilibrium’. In the suggested framework, the nominal wage is linked to the inflation rate by a specific indexation formula whose shape relies on unions’ bargaining positions. Assuming a constant peg for the real interest rate and the superneutrality of money, I show that the economy has a unique long-run quasi-equilibrium allocation whose stability depends only on the behaviour of the monetary authority. Moreover, I show how the operating of a ‘wage-spiration effect’ might lead to the persistence of involuntary unemployment. | |
| Handle: | http://hdl.handle.net/11567/462119 | |
| Appare nelle tipologie: | 01.01 - Articolo su rivista |
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