Wage and Public Debt Indexation
August 1, 1992
More Formats on IMF eLibrary
Order a Print CopyDisclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary
This paper examines the relationship between the degree of wage indexation chosen by private agents and the degree of indexation of the public debt. It is shown that the government is likely to respond to an increase in the degree of wage indexation by increasing the portion of the public debt that is indexed. By contrast, the effect of an increase in public debt indexation on the degree of wage indexation is ambiguous. In equilibrium, depending on the sources of shocks to the economy, the degree of wage indexation may be positively or negatively related to that of debt indexation. This relationship is analyzed both in situations where the policymakers are able to precommit policies and in those where precommitment is not possible.
Subject: Expenditure, Inflation, Public debt, Wage indexation, Wages
Keywords: debt indexation, WP
Pages:
34
Volume:
1992
DOI:
Issue:
067
Series:
Working Paper No. 1992/067
Stock No:
WPIEA0671992
ISBN:
9781451848847
ISSN:
1018-5941
Notes
Also published in Staff Papers, Vol. 40, No. 2, June 1993.
