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Unions, fiscal policy and central bank transparency

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Author Info

  • Giuseppe Ciccarone

    (Department of Public Economics, University of Rome 'La Sapienza')

  • Giovanni Di Bartolomeo

    (Department of Public Economics, University of Rome 'La Sapienza')

  • Enrico Marchetti

    (Department of Public Economics, University of Rome 'La Sapienza')

Abstract

In a unionised economy with supply-side fiscal policy transparency has two contrasting effects on economic performance. Uncertainty on central bank's preferences induces unions to reduce wages but also produces a fully-anticipated expansionary fiscal policy which favours the setting of higher wages. Even if the net effect depends on the preference parameters of public entities and on the effectiveness of fiscal policy on aggregate supply: (i) the positive effects of opacity in unionised economies without fiscal policy are confirmed when the central bank is populist; (ii) if it is instead sufficiently conservative, transparency reduces inflation and the output gap, but at the cost of higher macroeconomic volatility.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0508004.

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Length: 21 pages
Date of creation: 05 Aug 2005
Date of revision:
Handle: RePEc:wpa:wuwpma:0508004

Note: Type of Document - pdf; pages: 21
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Web page: http://128.118.178.162

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Keywords: Central bank transparency; Inflation; uncertainty;

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References

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Citations

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Cited by:
  1. Giuseppe Ciccarone & Enrico Marchetti, 2008. "Linear Contracts, Common Agency and Central Bank Preference Uncertainty," Working Papers 115, University of Rome La Sapienza, Department of Public Economics.
  2. Dai, Meixing & Sidiropoulos, Moïse, 2009. "Public investment, distortionary taxes and monetary policy transparency," MPRA Paper 15858, University Library of Munich, Germany.
  3. Meixing Dai & Moïse Sidiropoulos, 2010. "Monetary and fiscal policy interactions with central bank transparency and public investment," Working Papers of BETA 2010-21, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  4. Meixing Dai & Moïse Sidiropoulos, 2011. "Fiscal disciplining effect of central bank opacity: Stackelberg versus Nash equilibrium," Working Papers of BETA 2011-17, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  5. Meixing DAI & Moïse SIDIROPOULOS, 2009. "Fiscal Policy in a Monetary Union in the Presence of Uncertainty about the Central Bank Preferences," Working Papers of BETA 2009-06, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  6. Meixing Dai, 2012. "Static and Dynamic Effects of Central Bank Transparency," Working Papers of BETA 2012-08, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  7. Dai, Meixing & Sidiropoulos, Moïse & Spyromitros, Eleftherios, 2010. "Fiscal policy, institutional quality and central bank transparency," MPRA Paper 23766, University Library of Munich, Germany.
  8. Dai, Meixing, 2010. "Multiplicative uncertainty, central bank transparency and optimal degree of conservativeness," MPRA Paper 28548, University Library of Munich, Germany, revised Jul 2010.
  9. Meixing Dai & Qiao Zhang, 2013. "Central bank transparency with the cost channel," Working Papers of BETA 2013-06, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
  10. Ciccarone, Giuseppe & Marchetti, Enrico, 2009. "Revisiting the role of multiplicative uncertainty in a model without inflationary bias," Economics Letters, Elsevier, vol. 104(1), pages 37-39, July.
  11. Carsten Hefeker, 2011. "Policy Uncertainty and Economic Reforms in a Monetary Union," German Economic Review, Verein für Socialpolitik, vol. 12(3), pages 274-285, 08.
  12. Carsten Hefeker & Blandine Zimmer, 2009. "Uncertainty and fiscal policy in an asymmetric monetary union," MAGKS Papers on Economics 200913, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
  13. Moïse Sidiropoulos & Blandine Zimmer, 2009. "Monetary Union Enlargement, Fiscal Policy, and Strategic Wage Setting," Review of International Economics, Wiley Blackwell, vol. 17(3), pages 631-649, 08.
  14. Giuseppe Ciccarone & Enrico Marchetti, 2012. "Optimal linear contracts under common agency and uncertain central bank preferences," Public Choice, Springer, vol. 150(1), pages 263-282, January.

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