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Non-neutrality of monetary policy in policy games

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  • Nicola Acocella

    (University of Rome)

  • Giovanni Di Bartolomeo

    (University of Rome and University of Antwerp)

Abstract

The main aim of this article is to investigate the sources of non- neutrality in policy games involving one or more trade unions. We use a simple set up in order to clearly expose the basic mechanisms that also work in more complex frameworks. We show that there are common roots in the non-neutrality results so far obtained in apparently different contexts as, e.g., an inflation-averse union playing against the government; a union sharing some other common objective with a policy maker; or when more than one union interacts with monopolistic competitors in the goods market and a policymaker. We finally show that there are other cases where the non-neutrality result can arise.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0207002.

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Date of creation: 02 Jul 2002
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Handle: RePEc:wpa:wuwpma:0207002

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Web page: http://128.118.178.162

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Keywords: neutrality; money; unions; policy game;

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References

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  1. Francesco Lippi, 2003. "Strategic Monetary Policy with Non-Atomistic Wage Setters," CEIS Research Paper 17, Tor Vergata University, CEIS.
  2. David Soskice & Torben Iversen, 2000. "The Nonneutrality Of Monetary Policy With Large Price Or Wage Setters," The Quarterly Journal of Economics, MIT Press, vol. 115(1), pages 265-284, February.
  3. Svensson, Lars E O, 1995. "Optimal Inflation Targets, 'Conservative' Central Banks, and Linear Inflation Contracts," CEPR Discussion Papers 1249, C.E.P.R. Discussion Papers.
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  7. Cubitt, Robin P, 1997. " Stagflationary Bias and the Interaction of Monetary Policy and Wages in a Unionized Economy," Public Choice, Springer, vol. 93(1-2), pages 165-78, October.
  8. Lawler, Phillip, 2001. "Monetary Policy, Central Bank Objectives, and Social Welfare with Strategic Wage Setting," Oxford Economic Papers, Oxford University Press, vol. 53(1), pages 94-113, January.
  9. Cukierman, A. & Lippi, F., 2000. "Labor Markets and Monetary Union: a Strategic Analysis," Papers 365, Banca Italia - Servizio di Studi.
  10. Nicola Acocella & Giovanni Di Bartolomeo & Douglas A. Jr. Hibbs, 2003. "Labor market regimes and monetary policy," Macroeconomics 0307012, EconWPA.
  11. Nicola Acocella & Giovanni Di Bartolomeo, 2001. "Wage and public expenditure setting in a monetary union," Macroeconomics 0105002, EconWPA.
  12. Coricelli, Fabrizio & Cukierman, Alex & Dalmazzo, Alberto, 2000. "Monetary Institutions, Monopolistic Competition, Unionized Labour Markets And Economic Performance," CEPR Discussion Papers 2407, C.E.P.R. Discussion Papers.
  13. Cukierman, Alex & Lippi, Francesco, 1999. "Central bank independence, centralization of wage bargaining, inflation and unemployment:: Theory and some evidence," European Economic Review, Elsevier, vol. 43(7), pages 1395-1434, June.
  14. Rogoff, Kenneth, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, MIT Press, vol. 100(4), pages 1169-89, November.
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  16. Gruner, Hans Peter & Hefeker, Carsten, 1999. " How Will EMU Affect Inflation and Unemployment in Europe?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 33-47, March.
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  18. Gylfason, Thorvaldur & Lindbeck, Assar, 1994. " The Interaction of Monetary Policy and Wages," Public Choice, Springer, vol. 79(1-2), pages 33-46, April.
  19. Lawler, Phillip, 2000. "Centralised Wage Setting, Inflation Contracts, and the Optimal Choice of Central Banker," Economic Journal, Royal Economic Society, vol. 110(463), pages 559-75, April.
  20. Cukierman, A. & Lippi, F., 1998. "Central Bank Independence, Centralization of Wage Bargaining, Inflation and Unemployment: Theory and Evidence," Papers 332, Banca Italia - Servizio di Studi.
  21. Jerger, Jurgen, 2002. "Socially optimal monetary policy institutions," European Journal of Political Economy, Elsevier, vol. 18(4), pages 761-781, November.
  22. Acocella, Nicola & Ciccarone, Giuseppe, 1997. " Trade Unions, Nonneutrality and Stagflation," Public Choice, Springer, vol. 91(2), pages 161-78, April.
  23. Lawler, Phillip, 2000. "Union Wage Setting and Exchange Rate Policy," Economica, London School of Economics and Political Science, vol. 67(265), pages 91-100, February.
  24. al-Nowaihi, Ali & Levine, Paul, 1994. "Can reputation resolve the monetary policy credibility problem?," Journal of Monetary Economics, Elsevier, vol. 33(2), pages 355-380, April.
  25. Cubitt, Robin P, 1995. " Corporatism, Monetary Policy and Macroeconomic Performance: A Simple Game Theoretic Analysis," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(2), pages 245-59, June.
  26. Gylfason, Thorvaldur & Lindbeck, Assar, 1990. "Wages, money, and exchange rates with endogenous unions and governments," Journal of Policy Modeling, Elsevier, vol. 12(3), pages 469-493.
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