Monopolistic Unions, Brainard Uncertainty, And Optimal Monetary Policy
AbstractSome authors have argued that multiplicative uncertainty may be beneficial to society as the cautionary move reduces the inflation bias. Contrary to this claim, I show that, when there are non-atomistic wage setters, an increase in multiplicative uncertainty rises the real wage premium and unemployment and hence may reduce welfare. Furthermore, since central bank preferences also affect real variables, delegating policy to an independent central banker with an optimal degree of conservatism cannot, in general, deliver a second-best outcome.
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Bibliographic InfoPaper provided by Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University in its series CAMA Working Papers with number 2006-16.
Length: 13 pages
Date of creation: Jul 2006
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Other versions of this item:
- Timo Henckel, 2010. "Monopolistic unions, Brainard uncertainty, and optimal monetary policy," Oxford Economic Papers, Oxford University Press, vol. 62(2), pages 307-322, April.
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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