Optimal Monetary Policy and Wage Indexation Under Alternative Disturbances and Information Structures / Stephen J. Turnovsky.

Format:

Book

Author/Creator:

Turnovsky, Stephen J.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w2042.

NBER working paper series no. w2042

Language:

English

Subjects (All):

Wages--Cost-of-living adjustments.

Wages.

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1986.

Cambridge, Mass : National Bureau of Economic Research, 1986.

Summary:

The interdependence between the optimal degree of wage indexation and optimal monetary policy is analyzed for a small open economy under a variety of assumptions regarding: (i) relative information available to private agents and the stabilization authority; (ii) the perceived nature of the disturbances impinging on the economy. The distinctions between: (a) unanticipated and anticipated disturbances, and (b) permanent and transitory disturbances, are emphasized. The extent to which stabilization is achieved is shown to depend upon the nature of the disturbances and the available information. The policy redundancy issue is emphasized, implying that optimal rules can frequently be specified in many equivalent ways.

Notes:

Print version record

October 1986.