Textbook NK macro models have expected future inflation in the AS and IS schedules. Empirical evi... more Textbook NK macro models have expected future inflation in the AS and IS schedules. Empirical evidence suggests that lagged inflation has higher relevance for aggregate supply. We derive an AS curve with lagged inflation expectations assuming that wage indexation is the outcome of an uncertain centralized bargaining process European style. Subsequently, we show that the FED-based hybrid objective and ECB inflation objective imply the same interest rate targeting rule. Our AS curve exhibits Brainard type multiplicative uncertainty. It is shown that the popular linearized solution around the deterministic steady state can differ widely from the truly stochastic stationary solution.
We examine theoretically and empirically the role of the institutional settings of the labor mark... more We examine theoretically and empirically the role of the institutional settings of the labor market in explaining inflation volatility over time and across countries. Allowing for time variation in the wage indexation, we establish a direct relationship between inflation volatility and three labor market institutions factors: the bargaining power of unions, the number and independence of negotiations. Using the system-GMM estimator for linear dynamic panel data models on a sample covering 15 OECD countries, analysed in the period from 1960 to 2011, this paper finds that the bargaining power of unions increases the volatility of inflation whereas the number and independence of negotiations decrease inflation volatility. Furthermore, policy recommendations point towards a relatively more restrictive government intervention in the bargaining processes to reduce inflation volatility . JEL Classification Codes: E31, E40, E52
markdownabstractThis dissertation consists of four related papers investigating the causes and co... more markdownabstractThis dissertation consists of four related papers investigating the causes and consequences of time variations in the degree of wage indexation. Both empirical (structural) estimation and theoretical approaches are adopted in the investigation of the subject. Chapter 2 and Chapter 3 explore the causes while Chapter 3, Chapter 4 and Chapter 5 investigate the consequences. The main findings of this dissertation are as follows. Trend inflation is the most significant variable influencing the level of wage indexation while labour market institutional variables regarding wage (indexation) negotiations explain the variances of wage indexation and of inflation. The possibility of heavy-tailed distributed macroeconomic variables is the main consequence of time variations in wage indexation.
Cost-of-Living-Adjustment (COLA) coverage figures suggest a time variation in the degree of wage ... more Cost-of-Living-Adjustment (COLA) coverage figures suggest a time variation in the degree of wage indexation. In spite of this observation, most current literature conveniently assume a constant degree of indexation as this variable is not directly observable. This study intends to empirically measure the time variation in the degree of wage indexation. To this end, we derive a reduced form version of the New Keynesian Wage Phillips Curve under the assumption of a time varying degree of wage indexation. A state space methodology is then employed in estimating this model using data of selected OECD countries. The study subsequently investigates variables influencing the time variation in the degree of wage indexation. Our results consistently suggest a substantial time variation in the degree of wage indexation in all countries considered. The wage indexation estimates obtained for the US bear remarkable similarities with the figures suggested by COLA coverage. It is subsequently show...
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.
Textbook NK macro models have expected future inflation in the AS and IS schedules. Empirical evi... more Textbook NK macro models have expected future inflation in the AS and IS schedules. Empirical evidence suggests that lagged inflation has higher relevance for aggregate supply. We derive an AS curve with lagged inflation expectations assuming that wage indexation is the outcome of an uncertain centralized bargaining process European style. Subsequently, we show that the FED-based hybrid objective and ECB inflation objective imply the same interest rate targeting rule. Our AS curve exhibits Brainard type multiplicative uncertainty. It is shown that the popular linearized solution around the deterministic steady state can differ widely from the truly stochastic stationary solution.
We examine theoretically and empirically the role of the institutional settings of the labor mark... more We examine theoretically and empirically the role of the institutional settings of the labor market in explaining inflation volatility over time and across countries. Allowing for time variation in the wage indexation, we establish a direct relationship between inflation volatility and three labor market institutions factors: the bargaining power of unions, the number and independence of negotiations. Using the system-GMM estimator for linear dynamic panel data models on a sample covering 15 OECD countries, analysed in the period from 1960 to 2011, this paper finds that the bargaining power of unions increases the volatility of inflation whereas the number and independence of negotiations decrease inflation volatility. Furthermore, policy recommendations point towards a relatively more restrictive government intervention in the bargaining processes to reduce inflation volatility . JEL Classification Codes: E31, E40, E52
markdownabstractThis dissertation consists of four related papers investigating the causes and co... more markdownabstractThis dissertation consists of four related papers investigating the causes and consequences of time variations in the degree of wage indexation. Both empirical (structural) estimation and theoretical approaches are adopted in the investigation of the subject. Chapter 2 and Chapter 3 explore the causes while Chapter 3, Chapter 4 and Chapter 5 investigate the consequences. The main findings of this dissertation are as follows. Trend inflation is the most significant variable influencing the level of wage indexation while labour market institutional variables regarding wage (indexation) negotiations explain the variances of wage indexation and of inflation. The possibility of heavy-tailed distributed macroeconomic variables is the main consequence of time variations in wage indexation.
Cost-of-Living-Adjustment (COLA) coverage figures suggest a time variation in the degree of wage ... more Cost-of-Living-Adjustment (COLA) coverage figures suggest a time variation in the degree of wage indexation. In spite of this observation, most current literature conveniently assume a constant degree of indexation as this variable is not directly observable. This study intends to empirically measure the time variation in the degree of wage indexation. To this end, we derive a reduced form version of the New Keynesian Wage Phillips Curve under the assumption of a time varying degree of wage indexation. A state space methodology is then employed in estimating this model using data of selected OECD countries. The study subsequently investigates variables influencing the time variation in the degree of wage indexation. Our results consistently suggest a substantial time variation in the degree of wage indexation in all countries considered. The wage indexation estimates obtained for the US bear remarkable similarities with the figures suggested by COLA coverage. It is subsequently show...
Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch ge... more Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.
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