Dissecting the Two-Handed Approach: Who’s the Expert Hand For What?

Jürgen Jerger and Oliver Landmann

Applied Economics Quarterly (formerly: Konjunkturpolitik), 2006, vol. 52, issue 3, 50-70

Abstract: In this paper, we address the question of the macroeconomic assignment problem of wage and demand policy that is implicit in the “two-handed approach”. As a novelty relative to the existing literature, we thereby distinguish the two levels of policy instruments and policy makers. Unfortunately, but also illuminatingly for the policy debate, these two perspectives may well lead to opposing policy recommendations. Whereas demand policy is likely to be the instrument better suited to target output – and hence wage policy to target inflation – it is equally plausible that demand and wage policy makers should not be entrusted with these targets.

Keywords: Wage Policy; Demand Policy; Assignment Problem; Two-Handed Approach (search for similar items in EconPapers)
JEL-codes: E10 E61 (search for similar items in EconPapers)
Date: 2006
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