Strategic Monetary Policy with Non Atomistic Wage Setters

Francesco Lippi

No 1354, Econometric Society World Congress 2000 Contributed Papers from Econometric Society

Abstract: This paper presents a monetary policy game where firms' and wage setters' choices are derived explcitly from microfoundations. This approach allows us to relate some important features of the policy game to identifiable technological and preference parameters. Moreover, it shows that with large (uncoordinated) wage setters the policy maker's inflation aversion may have a permanent effect on employment even if private agents have rational expectations and complete information. The traditional result, whereby equilibrium employment is unrelated to the policy maker's inflation aversion is obtained as a special case when wage setting is fully decentralized (atomistic private sector). The model is used to reexamine the welfare effects of monetary policy delegation to a `conservative' central bank.

Date: 2000-08-01
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Related works:
Journal Article: Strategic Monetary Policy with Non-Atomistic Wage Setters (2003)
Working Paper: Strategic Monetary Policy with Non-Atomistic Wage Setters (2003)
Working Paper: Strategic Monetary Policy with Non-Atomistic Wage-Setters (2000)
Working Paper: Strategic Monetary Policy with Non-Atomistic Wage-Setters (2000)
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