Revisiting the Case for a Populist Central Banker
No 386, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area
It is known that discretionary policy may give rise to an inflationary bias if wages are negotiated in nominal terms. It has recently been argued that this bias can be eliminated, and welfare maximized, by the appointment of a central banker who does not care at all about inflation (a "populist" central banker). A conceptual flaw of the latter result is identified here. It is shown that when wages are negotiated in nominal terms the result is true only in the special case of a single, allencompassing, union. In the more general case of multiple unions, however, inflation increases linearly with their number and a populist central bank may turn out to decrease welfare.
Keywords: central bank conservatism; nominal wage bargaining (search for similar items in EconPapers)
JEL-codes: E5 J5 (search for similar items in EconPapers)
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Journal Article: Revisiting the case for a populist central banker (2002)
Working Paper: Revisiting the Case for a Populist Central Banker (2000)
Working Paper: Revisiting the Case for a Populist Central Banker (1999)
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