TY - JOUR AU - Perrotini Hernández, Ignacio AU - Vázquez Muñóz, Juan Alberto PY - 2018/01/30 Y2 - 2024/03/28 TI - IS THE WAGE RATE THE REAL ANCHOR OF THE INFLATION TARGETING MONETARY POLICY FRAMEWORK? JF - Investigación Económica JA - Investigación Económica VL - 76 IS - 302 SE - ARTÍCULO PARA EL DEBATE CIENTÍFICO DO - 10.1016/j.inveco.2018.01.002 UR - https://revistas.unam.mx/index.php/rie/article/view/63281 SP - 9-54 AB - <p><strong>N</strong>umerous central banks (CBs) focus on controlling the nominal interest rate (<em>i</em>) to sway the price level and meet the inflation target (πo) nowadays (Taylor, 1993; Bernanke <em>et al.</em>, 1999; Woodford, 2003). The <em>i</em> is taken to be the anchor for a low and stable rate of inflation in an open economy model. Yet, some analysts, orthodox and heterodox alike, have challenged this belief arguing that CBs turn to the exchange rate (<em>e</em>) channel and adopt it as a second policy tool with the aim of meeting πo (Svensson, 1999; Hüfner, 2004). The purpose of this paper is to show that the veritable anchor of inflation is neither <em>i</em> nor <em>e</em>, but the wage rate and the unit labour costs (ULC). We conduct econometric analyses based on data from a set of inflation targeting countries. The main empirical findings support our hypothesis regarding the higher importance of wages and the ULC <em>vis-à-vis i</em> and <em>e</em> in the determination of the CPI.</p> ER -