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Wage Indexation, Inflation Inertia, and the Cost of Disinflation

Javier Guillermo
Gómez-Pineda
Viernes, 1 Febrero 2002

Wage increases based on past inflation increase inflation inertia and hence increase the cost of disinflation. Higher central bank credibility and a higher frequency of wage negotiations correspond to lower inflation inertia and a lower cost of disinflati