indexation

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Indexing (Latin) - a system of linking wages, prices or interest rates to a specific economic indicator (usually the base inflation rate), a change in the value of this indicator results in a proportional change in wages, prices or interest rates.

The indexation can also be described as a conversion of a parameter value (eg pay) based on an indicator showing the change in a factor affecting the value of the parameter (eg inflation). Application

The indexation is applied by the state - eg when paying pensions - with the increase in inflation the nominal value of the service increases. The state should also index the boundaries of the tax brackets. When it does not, citizens nominally earn more, but they also "fall into" higher and higher tax brackets, for which they have to pay higher taxes. In addition, when the state does not ideate a tax-free amount, citizens actually pay more and more taxes because the tax base increases.

Indexes are used by banks - with the increase in inflation, the amounts to be reimbursed. Banks may also associate amounts to be repaid, for example from WIBOR.

Employer indexation - wage indexing allows you to adjust your wage agreements to the changed conditions (price increase due to inflation)

Indexing is used by insurance companies - indexing premiums (usually the anniversary of the contract), increasing the sum insured

Indexes may also be subject to budget components with forecasts for subsequent years. In this case, the percent increment of the value relative to the preceding period is taken.

wiki

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