Editing Indexation (section)

==Wages==
When a government decides to index wages of government employees to inflation it is to transfer the risk of inflation away from government workers onto the government.  Such a policy is to attempt to reduce inflationary expectation and in turn inflation when it is rising rapidly.  Research by economists is ambivalent on the success of such policies.  Some have deemed it a success including Friedman (1974), Gray (1976), and Fischer (1977).  Others have considered it less successful as they observed that indexation breeds inflation inertia (a reduction in the government and the central bank's effort in fighting inflation leading to inflation rate remaining higher than targeted).  This perspective is supported by Bonomo and Garcia (1994).

The economists diverging opinions on the merit of indexation often depend on what data they looked at.  A given country over a specific time series may have been successful conducting indexation.  While another country at another time may have been less successful.  Some economists believe there are appropriate times for indexation (when inflation is really high) and times for deindexation (when inflation has moderated after indexation, but remains still too high vs the central bank's inflation target).

In recent years Brazil, Chile, Israel, and Mexico have implemented successful inflation fighting campaigns by implementing the deindexation of wages (Lefort and Schmidt-Hebbel, 2002).