Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 1998:3:

Klas Fregert () and Lars Jonung ()

Abstract: We examine Gray´s theory of endogenous length of wage contracts and inflation indexation, using a uniquely long data set of blue-collar worker collective agreements in Sweden 1908-1995. Volatile monetary regimes, i. e. regimes with large macroeconomic uncertainty, are associated with short length and inflation indexed contracts. We also find inertia in changes in contract characteristics to changes in the regime. The findings support the Lucas critique, but cautions against simple divisions of time series in different regimes wherein agents' decision rules are assumed constant.

Keywords: Monetary regime; contract length; wage indexation; Lucas critique; (follow links to similar papers)

JEL-Codes: E30; E42; E65; (follow links to similar papers)

30 pages, June 1, 1998, Revised April 21, 1999

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This paper is published as:
Fregert, Klas and Lars Jonung, (2008), 'Inflation Targeting Is a Success, So Far: 100 Years of Evidence from Swedish Wage Contracts', Economics: The Open-Access, Open-Assessment E-Journal, Vol. 2, No. 2008-31, pages 1-25

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