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On Central Bank Independence, Wage Indexing And A Monopoly Union

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  • Tilemahos Efthimiadis

Abstract

The Rogoff proposition (Quarterly Journal of Economics, 100 (1985), pp. 1169–90) that it is socially optimal to delegate monetary policy to a central banker that is more inflation‐averse than society has been widely accepted and implemented in practice. However, there is a literature that argues that, if there is an inflation‐averse monopoly union in the economy, it is optimal to delegate monetary policy to an ‘ultra‐liberal’ central banker, i.e., a central banker that is interested only in output. In this paper, we examine whether introducing wage indexing into the latter models has any effect on the optimal degree of central bank conservativeness and find that, once a monopoly‐type labour union is introduced, wage indexing does not matter for the determination of the optimal degree of conservativeness of the monetary authority.

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  • Tilemahos Efthimiadis, 2007. "On Central Bank Independence, Wage Indexing And A Monopoly Union," Bulletin of Economic Research, Wiley Blackwell, vol. 59(1), pages 25-36, January.
    • Handle: RePEc:bla:buecrs:v:59:y:2007:i:1:p:25-36
    DOI: 10.1111/j.0307-3378.2007.00251.x
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    1. D. Masciandaro, 2019. "What Bird Is That? Central Banking And Monetary Policy In The Last Forty Years," BAFFI CAREFIN Working Papers 19127, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.

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