Unions, fiscal policy and central bank transparency

Giuseppe Ciccarone, Giovanni Di Bartolomeo () and Enrico Marchetti
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Giuseppe Ciccarone: Department of Public Economics, University of Rome 'La Sapienza'

Macroeconomics from EconWPA

Abstract: In a unionised economy with supply-side fiscal policy transparency has two contrasting effects on economic performance. Uncertainty on central bank's preferences induces unions to reduce wages but also produces a fully-anticipated expansionary fiscal policy which favours the setting of higher wages. Even if the net effect depends on the preference parameters of public entities and on the effectiveness of fiscal policy on aggregate supply: (i) the positive effects of opacity in unionised economies without fiscal policy are confirmed when the central bank is populist; (ii) if it is instead sufficiently conservative, transparency reduces inflation and the output gap, but at the cost of higher macroeconomic volatility.

Keywords: Central bank transparency; Inflation; uncertainty (search for similar items in EconPapers)
JEL-codes: E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2005-08-05
Note: Type of Document - pdf; pages: 21
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http://129.3.20.41/eps/mac/papers/0508/0508004.pdf (application/pdf)

Related works:
Journal Article: UNIONS, FISCAL POLICY AND CENTRAL BANK TRANSPARENCY (2007)
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