Asymmetric wage indexation

Cover, James Peery; Hoose, David D. Van

doi:10.1007/bf02299145

Cited by 14 publications

(11 citation statements)

References 16 publications

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“…Alternatively, higher uncertainty and/or higher trend price inflation may increase agents' incentives for upward nominal flexibility compared with downward flexibility (see, e.g. Cover and Van Hoose () and Ball and Mankiw ()).…”

mentioning

confidence: 99%

On the Pass‐Through of Exchange Rate Fluctuations to the Macroeconomy: Imports in Developing and Advanced Countries

Kandil¹

2014

Int. J Fin Econ

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Using annual data, the paper studies the time-series evidence regarding the allocation of fluctuations in the exchange rate between demand components, real growth and price inflation in a sample of developing and advanced countries. Subsequently, cross-country correlations establish the relevance of fluctuations in imports to the pass-through channel of exchange rate fluctuations to economic activity. Further, the evidence evaluates the direct effects of fluctuations in the nominal values of imports on price inflation and real growth. Cross-country regressions evaluate the effects of variation in the average and variability of exchange rate fluctuations on import growth. Subsequently, variation in indicators of macroeconomic performance (real growth, price inflation and the growth of private consumption and investment) is evaluated with respect to variation in the exchange rate and/or import growth. In developing countries, the evidence indicates the relevance of fluctuations in import growth to the transmission mechanism of exchange rate fluctuations to the macroeconomy. Where this relationship dominates, fluctuations in the exchange rate are no longer significant to the difference in macroeconomic indicators, having controlled for variation in import growth across countries. In advanced countries, import fluctuations may be transmitted to economic activity, further to fluctuations in the exchange rate, in line with variations in terms of trade.

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mentioning

confidence: 99%

On the Pass‐Through of Exchange Rate Fluctuations to the Macroeconomy: Imports in Developing and Advanced Countries

Kandil¹

2014

Int. J Fin Econ

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“…index clauses that are triggered only when inflation is above a certain threshold. This is likely to result in contracts with a lower base wage and higher indexation than in our analysis, allowing wage setters to use the indexation clauses symmetrically to achieve both upward and downward flexibility in this case as well (Cover and Van Hoose, 2002).…”

Section: Discussionmentioning

confidence: 90%

Nominal Wage Flexibility, Wage Indexation and Monetary Union

Calmfors¹,

Johansson

2006

The Economic Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. 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 flexibility is only an imperfect substitute for an own monetary policy. It is possible that an increase in wage flexibility is welfare-decreasing because of the accompanying rise in price variability. The interaction between wage setting and central bank behaviour may result in either multiple equilibria or a unique full-indexation equilibrium. Terms of use: Documents in EconStor mayJEL Classification: E24, E32, F33, F41.

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“…Cover and Vanhoose (2002) raised the issue of asymmetric wage indexation as a source of asymmetric nominal wage flexibility because in practice labour union contracts with indexing clauses are asymmetric. Conditions on the supply side in the labour and/or product markets may differentiate the slope of the aggregate supply curve in the face of expansionary and contractionary demand shifts.…”

Section: Supply-side Asymmetrymentioning

confidence: 99%

“…The source of asymmetry has varied between sticky-wage and sticky-price explanations of business cycles. Cover and Vanhoose (2002) raised the issue of asymmetric wage indexation as a source of asymmetric nominal wage flexibility because in practice labour union contracts with indexing clauses are asymmetric. Sticky-wage models have traced sources of cyclical fluctuations to conditions in the labour market (see, e.g.…”

Section: Supply-side Asymmetrymentioning

confidence: 99%

External Cyclicality in the Face of Aggregate Demand Shocks: Pros and Cons Across Developed and Developing Countries

Kandil

2018

Economic Notes

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The paper studies variation in the effects of aggregate demand shocks on the external sector and underlying components and distinguishes between the effects of expansionary and contractionary shocks. The aim is to study the determinants and implications of cyclicality across advanced and developing countries. The composite evidence points to high degree of cyclicality in many countries. Based on time-series correlations, there is a stronger cyclical co-movement between the trade and current account balances across advanced countries, compared to developing countries. Further, fluctuations in the financial balance are dependent on developments in exports in many developing countries. The determinants of external vulnerability vary with macroeconomic indicators. The evidence points to higher vulnerability of the external balance with respect to higher trend inflation across developing countries. In addition, constraints on capacity in developing countries could risk external stability as trend growth increases across countries. Government spending is an important determinant of external stability in developing countries, reflecting the adverse implications of higher government spending and a widening fiscal deficit on debt sustainability and external financial flows. Further, private consumption is a key driver of aggregate uncertainty and cyclical fluctuations in the external balances across developing countries.(J.E.L.: E21, E32, E61, E62, E63).

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Asymmetric wage indexation

Abstract: Models of wage indexation uniformly

Cited by 14 publications

References 16 publications

On the Pass‐Through of Exchange Rate Fluctuations to the Macroeconomy: Imports in Developing and Advanced Countries

On the Pass‐Through of Exchange Rate Fluctuations to the Macroeconomy: Imports in Developing and Advanced Countries

Nominal Wage Flexibility, Wage Indexation and Monetary Union

External Cyclicality in the Face of Aggregate Demand Shocks: Pros and Cons Across Developed and Developing Countries

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