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STABILIZATION WITH WAGE INDEXATION AND EXCHANGE RATE FLEXIBILITY
Author(s) -
Gompel J.
Publication year - 1994
Publication title -
journal of economic surveys
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.657
H-Index - 92
eISSN - 1467-6419
pISSN - 0950-0804
DOI - 10.1111/j.1467-6419.1994.tb00103.x
Subject(s) - indexation , economics , wage , flexibility (engineering) , exchange rate flexibility , context (archaeology) , exchange rate , exchange rate regime , macroeconomics , monetary economics , labour economics , monetary policy , paleontology , management , biology
. This survey examines the role of wage indexation and exchange rate policy in dampening fluctuations in output around its target level. It is demonstrated that the appropriate choice for wage indexation and exchange rate flexibility is highly sensitive to the nature and the relative importance of the shocks impinging upon the economy, as well as to the relevant parameters in the economy. Moreover, the question of the desired flexibility of the exchange rate should be studied in the context of wage indexation, and vice versa. This interdependence raises the possibility of both policies being complements or substitutes to each other depending on the number of shocks that perturb the economy.