Indexation, inflationary inertia, and the sacrifice coeficient

When inflation is chronic, firms develop indexation practices that automatically tie the growth of prices, wages, and other contracts to the performance of some comprehensive price index. The microeconomic advantages of indexation are evident and derive from the immunization of the relative price sy...

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Autor principal:	Herrera, Luis Oscar
Formato:	Artículo
Lenguaje:	eng
Publicado:	Banco Central de Chile 2019
Materias:	INFLACIÓN PRECIOS POLÍTICA MONETARIA ÍNDICE DE PRECIOS MACROECONOMÍA SALARIOS
Acceso en línea:	https://hdl.handle.net/20.500.12580/3632
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spelling	oai-20.500.12580-36322021-04-24T10:56:02Z Indexation, inflationary inertia, and the sacrifice coeficient Herrera, Luis Oscar INFLACIÓN PRECIOS POLÍTICA MONETARIA ÍNDICE DE PRECIOS MACROECONOMÍA SALARIOS When inflation is chronic, firms develop indexation practices that automatically tie the growth of prices, wages, and other contracts to the performance of some comprehensive price index. The microeconomic advantages of indexation are evident and derive from the immunization of the relative price system against the extravagances of inflation. From a macroeconomic perspective, however, this practice has been criticized for perpetuating the inflationary thrust, accentuating its volatility, and influencing the process of relative price adjustments in the face of real shocks. Those in charge of monetary policy generally oppose indexation under the argument that it raises the costs of reducing or controlling inflation, and its elimination has been considered a prerequisite for ensuring the success of the drastic stabilization plans that have been implemented in countries with a long history of inflation. 2019-11-01T00:01:36Z 2019-11-01T00:01:36Z 2002 Artículo 956-7421-110 https://hdl.handle.net/20.500.12580/3632 eng Serieson Central Banking, Analysis, and Economic Policies, no. 2 Attribution-NonCommercial-NoDerivs 3.0 Chile http://creativecommons.org/licenses/by-nc-nd/3.0/cl/ .pdf Sección o Parte de un Documento p. 183-206 application/pdf Banco Central de Chile
institution	Banco Central
collection	Banco Central
language	eng
topic	INFLACIÓN PRECIOS POLÍTICA MONETARIA ÍNDICE DE PRECIOS MACROECONOMÍA SALARIOS
spellingShingle	INFLACIÓN PRECIOS POLÍTICA MONETARIA ÍNDICE DE PRECIOS MACROECONOMÍA SALARIOS Herrera, Luis Oscar Indexation, inflationary inertia, and the sacrifice coeficient
description	When inflation is chronic, firms develop indexation practices that automatically tie the growth of prices, wages, and other contracts to the performance of some comprehensive price index. The microeconomic advantages of indexation are evident and derive from the immunization of the relative price system against the extravagances of inflation. From a macroeconomic perspective, however, this practice has been criticized for perpetuating the inflationary thrust, accentuating its volatility, and influencing the process of relative price adjustments in the face of real shocks. Those in charge of monetary policy generally oppose indexation under the argument that it raises the costs of reducing or controlling inflation, and its elimination has been considered a prerequisite for ensuring the success of the drastic stabilization plans that have been implemented in countries with a long history of inflation.
format	Artículo
author	Herrera, Luis Oscar
author_facet	Herrera, Luis Oscar
author_sort	Herrera, Luis Oscar
title	Indexation, inflationary inertia, and the sacrifice coeficient
title_short	Indexation, inflationary inertia, and the sacrifice coeficient
title_full	Indexation, inflationary inertia, and the sacrifice coeficient
title_fullStr	Indexation, inflationary inertia, and the sacrifice coeficient
title_full_unstemmed	Indexation, inflationary inertia, and the sacrifice coeficient
title_sort	indexation, inflationary inertia, and the sacrifice coeficient
publisher	Banco Central de Chile
publishDate	2019
url	https://hdl.handle.net/20.500.12580/3632
work_keys_str_mv	AT herreraluisoscar indexationinflationaryinertiaandthesacrificecoeficient
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Indexation, inflationary inertia, and the sacrifice coeficient

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