Central Banks, Trade Unions and Reputation – Is there Room for an Expansionist Manoeuvre in the European Union?
AbstractIt is now a few years since the introduction of the common currency, and Europe is still experiencing high unemployment. The conventional logic attributes this problem to strong trade unions and other flaws in the labour market. This article takes a different approach. Using a game theoretic model we look at the changes that occur if trade unions and the central bank have different options to choose from in a climate of uncertainty. In a singlestage game the most probable outcome is a high unemployment rate as high as the NAIRU. However, there is also a slight chance that a central bank might take the risk associated with employment expansion (if trade unions cooperate the risk pays off). Moreover, results change dramatically if the game is repeated. This allows for effects on the trade union’s reputation. It can be shown that this, in turn, improves the likelihood of employment expansion.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 19719.
Date of creation: 01 Sep 2008
Date of revision:
Central Bank; Reputation; Trade Unions;
Other versions of this item:
- Pusch, Toralf & Heise, Arne, 2008. "Central banks, trade unions and reputation - is there room for an expansionist manoeuvre in the European Union?," Working Papers on Economic Governance 31, University of Hamburg, Department of Socioeconomics.
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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