The impact of reference norms on inflation persistence when wages are staggered

In this paper we present an extension of the Taylor model with staggered wages inwhich wage-setting is also influenced by reference norms (i.e. by benchmark wages).We show that reference norms can considerably increase the persistence of inflationand the extent of real wage rigidity but that these effects depend on the definition ofreference norms (e.g. how backward-looking they are) and on whether the importanceof norms differs between sectors. Using...

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Year of publication:	2009-04-24
Authors:	Knell, Mark ; Stiglbauer, Alfred
Institutions:	European Central Bank
Subject:	Inflation \| Reallohn \| real wages \| Inflationsbekämpfung \| targeting costs \| 1980 - 2006

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Abstract
Non-technical summary
1 Introduction
2 A model with wage staggeringand reference norms
2.1 The set-up
2.2 The solution of the model
2.3 The role of different reference norms
2.4 Asymmetries in the importance ofreference norms
3 Empirical part
3.1 Estimation equation
3.2 The Austrian system of collectivewage bargaining
3.3 The data
3.4 Empirical strategy
3.5 Main results
3.6 Nested and non-nested testson the importance of reference norms
3.7 An analysis of the individualheterogeneous coeffi cients
3.8 Further robustness tests
4 Conclusions
References
Appendices
Figures and tables
European Central Bank Working Paper Series

Persistent link: https://www.econbiz.de/10005866627