Trend inflation as a workers’ discipline device
Giovanni Di Bartolomeo (),
Patrizio Tirelli () and
Empirica, 2013, vol. 40, issue 2, 215-235
The paper shows that a monetary policy regime that allows for a positive inflation rate disciplines monopolistic wages setters if these, when setting contracts, internalize the consequences of their choices for economic outcomes over the life of the contract. We also show that discretionary monetary policy has real effects when wage setters are non atomistic, whereas commitment to a positive inflation rate is effective irrespective of the degree of labor market centralization. Finally, the model may explain the different unemployment dynamics in Europe and in the United States, following the 1980 disinflationary episode. Our approach suggests that disinflation induced an adverse effect on the labor market wedge and that such effect was stronger in Europe, due to the particular importance of large wage setters. Copyright Springer Science+Business Media, LLC. 2013
Keywords: Inflation bias; Discretionary monetary policy; Non-zero inflation targeting; Unemployment; Strategic wage setters; E52; E58; J51; E24 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Access to full text is restricted to subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:kap:empiri:v:40:y:2013:i:2:p:215-235
Ordering information: This journal article can be ordered from
http://www.springer. ... ration/journal/10663
Access Statistics for this article
Empirica is currently edited by Fritz Breuss and Fritz Breuss
More articles in Empirica from Springer, Austrian Institute for Economic Research, Austrian Economic Association Contact information at EDIRC.
Series data maintained by Sonal Shukla ().