IDEAS home Printed from https://ideas.repec.org/p/chb/bcchwp/31.html
   My bibliography  Save this paper

Indización, Inercia Inflacionaria y el Coeficiente de Sacrificio

Author

Listed:
  • Luis Oscar Herrera

Abstract

The objective of this paper is to examine the relation between automatic price and salary indexation and the cost of reducing inflation. The analysis complements previous work done by Ball (1994, 1995), Bonomo and Garcia (1995) and Jadresic (1995, 1996), but with an emphasis on the consequences of the frequency of indexation, and other characteristics of labor contracts, on the sacrifice coefficient. Calvo's (1983) supply equation is extended to include automatic readjustability clauses relating to past inflation, and responses of the economy to various monetary stabilization experiments are simulated. The results suggest that indexation introduces inertia in the inflationary process and therefore increases the sacrifice coefficient. Interestingly, the relation between the frequency of indexation and the cost of stabilization is not monotonic. A greater indexation frequency can reduce de sacrifice coefficient. The examples studied suggest that with biannual wage contracts, the typical structure observed in Chile, the sacrifice coefficient is maximized with six-month readjustment frequency, the typical frequency observed in Chile.

Suggested Citation

  • Luis Oscar Herrera, 1998. "Indización, Inercia Inflacionaria y el Coeficiente de Sacrificio," Working Papers Central Bank of Chile 31, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:31
    as

    Download full text from publisher

    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_31.pdf
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chb:bcchwp:31. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alvaro Castillo (email available below). General contact details of provider: https://edirc.repec.org/data/bccgvcl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.