A standard open-economy model is used to show that price stabilization programs are more likely to succeed if labor contracts specify forward-looking wage indexation. Compared with contracts specifying backward-looking wage indexation or wages based on static expectations, such contracts will...

This paper presents a model whose key feature is the existence of wage indexation clauses to lagged inflation. The main result that can be drawn is that the higher the proportion of labour contracts that include indexation clauses, the more important past inflation will be when explaining...

We estimate a New Keynesian wage Phillips curve for a panel of 24 OECD countries, and allow the degree of wage indexation to past inflation to vary according to the monetary policy regime. We find that the extent of wage indexation is significantly lower in an inflation targeting regime, in...

Membership in a monetary union implies stronger incentives for nominal wage flexibility in the form of wage indexation and shorter contract length than nonmembership. For example, entry into a monetary union may cause a move from a non-indexation to an indexation equilibrium. But more wage...

We study the importance of wage rigidities for the monetary policy transmission mechanism. Using uniquely rich micro data on Swedish wage negotiations, we isolate periods when the labor market is covered by fixed wage contracts. Importantly, negotiations are coordinated in time but their...

We study the importance of wage rigidities for the monetary policy transmission mechanism. Using uniquely rich micro data on Swedish wage negotiations, we isolate periods when the labor market is covered by fixed wage contracts. Importantly, negotiations are coordinated in time but their...

We study the distributional effect of a wage indexation mechanism - the Scala Mobile (SM) - that heavily compressed the distribution of Italian wages during the 1970s and 1980s. The SM imposed large real wage increases at the bottom of the distribution and was essentially irrelevant for...

Cost-of-Living-Adjustment (COLA) coverage figures suggest a time variation in the degree of wage indexation. In spite of this observation, most current literature conveniently assume a constant degree of indexation as this variable is not directly observable. This study intends to empirically...

In this paper, we provide evidence on the existence and evolution of downward real and nominal wage rigidities in Mexico in the period 1996-2011, which was characterized by a reduction in the level and volatility of inflation. Our results suggest that, throughout the period, a larger fraction of...