The Monetary Instrument in a Unionised Economy: Flexible Inflation Targeting versus Fixed Money Growth

Marcelo Sánchez ()
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Marcelo Sánchez: European Central Bank, Frankfurt am Main, Germany

Rivista di Politica Economica, 2011, issue 3, 393-414

Abstract: This paper finds mixed results about the relative performance of the two alternative monetary targeting arrangements here considered (unconditional and conditional). Unconditional monetary targeting (given by fixed money growth) may have an advantage in disciplining unions and thus reducing labour market distortions, and may be perceived to be more transparent. Conditional monetary targeting, which relies on a policy rule that responds to shocks, may be an especially attractive regime when unpredictable events introduce too much macroeconomic variability and when the unconditional approach fails to elicit the best response from the private sector (in terms of collective bargaining and/or transparency perceptions).

Keywords: monetary targeting; optimal monetary policy; collective bargaining (search for similar items in EconPapers)
JEL-codes: E42 E52 J51 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:rpo:ripoec:y:2011:i:3:p:393-414

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