TY  - JOUR
AU  - Ball,Laurence
AU  - Cecchetti,Stephen G.
TI  - Wage Indexation and Time-Consistent Monetary Policy
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2948
PY  - 1989
Y2  - April 1989
UR  - http://www.nber.org/papers/w2948
L1  - http://www.nber.org/papers/w2948.pdf
N1  - Author contact info:
Laurence M. Ball
Department of Economics
Johns Hopkins University
Baltimore, MD 21218
Tel: 410/516-7605
Fax: 410/516-7600
E-Mail: lball@jhu.edu

Stephen G. Cecchetti
Monetary and Economic Department
Bank for International Settlements
Centralbahnplatz 2
4002 Basel
SWITZERLAND
Tel: +41 61 280 8350
Fax: +41 61 280 9113
E-Mail: stephen.cecchetti@bis.org
AB  - This paper investigates the effects of wage indexation on the time-consistent level of inflation. Departing from previous work on time-consistent policy, we study a structural model of the economy. Indexation reduces the cost of inflation, which is inflationary, and steepens the Phillips curve, which is anti-inflationary. In most cases, the net effect is to raise inflation but also to raise welfare: the loss from higher inflation is outweighed by the gain from greater protection against inflation.
ER  -