WAGE INDEXATION AND THE EXCHANGE-RATE REGIME - A STRATEGIC ANALYSIS

The output and inflation effects of various kinds of shocks depend to a large extent oil the degree of wage indexation and on the degree of foreign exchange market intervention. In this paper we focus on the st rategic interactions which arise if tile degree of wage indexation bel ongs to the strategy space of a large trade union. The foreign exchang e market intervention rule and tile indexation parameter are then the outcome of a game between the government and the trade union.