TY  - JOUR
AU  - Persson,Torsten
AU  - Wijnbergen,Sweder van
TI  - Signalling, Wage Controls and Monetary Disinflation Policy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2939
PY  - 1989
Y2  - April 1989
UR  - http://www.nber.org/papers/w2939
L1  - http://www.nber.org/papers/w2939.pdf
N1  - Author contact info:
Torsten Persson
Torsten and Ragnar Soderberg Chair in Economic Sci
Institute for International Economic Studies
Stockholm University
SE-106 91 Stockholm
SWEDEN
Tel: +46 8 163066
Fax: +46 8 6747801
E-Mail: Torsten.Persson@iies.su.se

Sweder van Wijnbergen
E-Mail: svw.heas@planet.nl
AB  - Wage and price controls have a long and somewhat disreputable history, presumably because of their frequent use in many countries as short run substitutes for measure~ with more lasting effects on the inflation rate. But, in 1985 and 1986, Argentina, Brazil, and Israel used extensive wage-price controls as part of more comprehensive disinflation programs, .often labeled "heterodox" stabilization programs. To date, the Israeli stabilization seems to have succeeded, while the Argentinean and Brazilian stabi1izations have clearly ended in failure. This experience raises many questions. One view is that controlling one nominal variable, namely the money supply, is enough to bring down inflation provided that sound fiscal policies are also adopted. Therefore, wage and price controls should be avoided, because of their microeconomic costs. It is clear that controls do have microeconomic costs, but can they also have macroeconomic benefits? Under which circumstances do controls help in bringing down inflation, and when do they just suppress it temporarily? What is the required supporting role of fiscal and monetary policy while they are in place? These are the issues addressed in this paper.
ER  -