Abstract.
This note surveys the welfare and real consequences of wage indexing in a stochastic economy whose monetary authority lacks credibility. It shows in a unified framework that those consequences might differ markedly depending on the nature and timing of the dominant disturbance in that economy. It finally provides a closed-form expression of the optimal level of wage indexing when all the shocks are taken into account.
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Received: July 2002, Accepted: February 2004,
JEL Classification:
E61
Pierre-Guillaume Méon: I thank Giuseppe Diana and an anonymous referee for helpful comments and suggestions. The remaining errors are definitely mine.
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Méon, PG. A note on the welfare consequences of wage indexing in a stochastic economy. Portuguese Economic Journal 3, 179–187 (2004). https://doi.org/10.1007/s10258-004-0028-9
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DOI: https://doi.org/10.1007/s10258-004-0028-9