Strategic Monetary Policy with Non-Atomistic Wage Setters: A Case for Non-Neutrality
No 2218, CEPR Discussion Papers from C.E.P.R. Discussion Papers
The literature on monetary policy games establishes that policy makers' attempts to boost employment above the 'natural' rate are futile and result in an inflationary bias when wage setters have rational expectations and the policy maker cannot precommit. This implies that a variation of the policy maker's degree of inflation aversion does not have a systematic effect on the employment level. This paper shows that this last neutrality result hinges crucially on the assumption that wage setters are atomistic. In the presence of non-atomistic agents, who set nominal wages and have monopolistic power, the policy maker's inflation aversion may have a systematic effect on equilibrium employment even if agents have rational expectations and complete information. The model is used to re-assess the welfare implications of monetary policy delegation to a 'conservative' central bank.
Keywords: Inflation; Monopolistic Power; Non-Atomism; Non-Neutrality; Unemployment; Unions (search for similar items in EconPapers)
JEL-codes: E5 J5 (search for similar items in EconPapers)
References: Add references at CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed
Downloads: (external link)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at firstname.lastname@example.org
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:cpr:ceprdp:2218
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... ers/dp.php?dpno=2218
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().