IDEAS home Printed from https://ideas.repec.org/p/imf/imfwpa/2024-105.html
   My bibliography  Save this paper

Examining Price-Wage Dynamics in a Small Open Economy: The Case of Uruguay

Author

Listed:
  • Mr. Pau Rabanal
  • M. Belen Sbrancia

Abstract

The recent increase of inflation globally has led to a renewed interest in understanding the link between inflation and wages. In Uruguay, the presence of centralized wage bargaining and indexation practices raises the question as to what extent wage growth dynamics can make the response of inflation to shocks more persistent. We use a medium-scale DSGE model which incorporates indexation in the wage setting equation to analyze the interactions between wage setting behavior and other macroeconomic variables, as well as the role of monetary policy. The analysis suggests that wage indexation increases the persistence of the response of inflation to domestic and foreign shocks, it also affects the monetary policy transmission mechanism and the severity of the trade-offs faced by the central bank.

Suggested Citation

  • Mr. Pau Rabanal & M. Belen Sbrancia, 2024. "Examining Price-Wage Dynamics in a Small Open Economy: The Case of Uruguay," IMF Working Papers 2024/105, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2024/105
    as

    Download full text from publisher

    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=549485
    Download Restriction: no
    ---><---

    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:imf:imfwpa:2024/105. 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: Akshay Modi (email available below). General contact details of provider: https://edirc.repec.org/data/imfffus.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.