MONOPOLISTIC UNIONS, BRAINARD UNCERTAINTY, AND OPTIMAL MONETARY POLICY

Timo Henckel ()

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Some authors have argued that multiplicative uncertainty may benefit society as the cautionary motive reduces the inflation bias. However, when there are non-atomistic wage setters, higher multiplicative uncertainty may raise the wage premium and unemployment and thus reduce welfare. Furthermore, since central bank preferences also affect the wage premium, delegating policy to an independent central banker with an optimal degree of conservatism cannot, in general, deliver a second-best outcome.

JEL-codes: E52 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2006-07
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Related works:
Journal Article: Monopolistic unions, Brainard uncertainty, and optimal monetary policy (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2006-16

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