Foreign Supply Shocks, Wage Indexation and Optimal Monetary Policy
During the last two decades the major changes in the price of imported raw materials substantially affected the economic performance of OECD countries. Consequently, there has been extensive theoretical and political debate about the proper adjustment to these external shocks, and whether monetary policy should be accommodating in the event of rising energy prices.
KeywordsMonetary Policy Real Exchange Rate Purchase Power Parity Nominal Wage Supply Shock
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