Recent empirical contributions demonstrate that countries with less independent central banks enjoy lower output losses during disinflationary cycles. To explain these somewhat surprising empirical findings, some authors suggest that independent central banks probably face a flatter short-run Phillips curve. In this paper, we provide both theoretical and empirical arguments to rationalize this intuition. We demonstrate that, since central bank independence reduces the mean inflation rate and its variance, wage setters opt for a lower degree of nominal wage indexation leading to more wage and price inertia and, thus, to a flatter short-run Phillips curve. Consequently, this paper put forward a channel of positive influence of central bank independence on the sacrifice ratio through its impact on nominal wage indexation. Empirical tests, performed using a sample of 19 OECD countries during the 1960–1990 period, show that these theoretical results hold also empirically.
Central Bank Independence and the Cost of Disinflation : Why the Wage Contracts Length Matters?
Résumé
en
Recent empirical contributions demonstrate that countries with less independent central banks enjoy lower output losses during disinflationary cycles. To explain these somewhat surprising empirical findings, some authors suggest that independent central banks probably face a flatter short-run Phillips curve. In this paper, we provide both theoretical and empirical arguments to rationalize this intuition. We demonstrate that, since central bank independence reduces the mean inflation rate and its variance, wage setters opt for a lower degree of nominal wage indexation leading to more wage and price inertia and, thus, to a flatter short-run Phillips curve. Consequently, this paper put forward a channel of positive influence of central bank independence on the sacrifice ratio through its impact on nominal wage indexation. Empirical tests, performed using a sample of 19 OECD countries during the 1960–1990 period, show that these theoretical results hold also empirically.
Auteur(s)
Giuseppe Diana1, 2
, Moise Sidiropoulos3, 1, 2
1
BETA -
Bureau d'Économie Théorique et Appliquée
( 93745 )
- Université de Lorraine, UFR Droit Sciences Economiques et Gestion, 13 place Carnot CO 70026, 54035 Nancy Cedex
Université de Strasbourg, Faculté des Sciences Economiques et de Gestion, 61 avenue de la Forêt Noire 67085 Strasbourg Cedex
- France
Institut National de la Recherche Agronomique UMR1443 ( 92114 )
;
Université de Strasbourg ( 199013 )
;
Université de Lorraine ( 413289 )
;
Centre National de la Recherche Scientifique UMR7522 ( 441569 )
2
Université Louis Pasteur - Strasbourg I
( 300320 )
- France
3
Aristotle University of Thessaloniki
( 303184 )
- University Campus, 54124 Thessaloniki, Greece
- Grèce
Comité de lecture
Oui
Vulgarisation
Non
Langue du document
Anglais
Nom de la revue
International Advances in Economic Research
(ISSN : 1083-0898, ISSN électronique : 1573-966X)
Publié par Springer Verlag
Revue non référencée dans Sherpa-Romeo
Audience
Internationale
Date de publication
2004
Page/Identifiant
287-297
Licence
Paternité
Volume
12
Domaine(s)
Sciences de l'Homme et Société/Economies et finances
E - Macroeconomics and Monetary Economics/E.E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit/E.E5.E52 - Monetary Policy
E - Macroeconomics and Monetary Economics/E.E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit/E.E5.E58 - Central Banks and Their Policies
Giuseppe Diana, Moise Sidiropoulos. Central Bank Independence and the Cost of Disinflation : Why the Wage Contracts Length Matters?. International Advances in Economic Research, 2004, 12, pp.287-297. ⟨10.1007/s11294-006-9017-3⟩. ⟨hal-00279023⟩