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Uncertainty and Monetary Policy in a Wage Bargaining Model


  • Sorensen, Jan Rose


In a wage bargaining model, increased uncertainty concerning monetary and real aggregates is shown to give rise to a higher equilibrium unemployment rate. Moreover, the equilibrium unemployment rate is found to depend on the choice of monetary policy regime, as this choice affects the uncertainty wagesetters face when setting the nominal wage rate. It is also shown that the equilibrium inflation rate may depend on uncertainty in such a way that increased uncertainty gives rise to a higher equilibrium unemployment rate as well as a higher equilibrium inflation rate--or what has been called stagflation. Copyright 1992 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Sorensen, Jan Rose, 1992. " Uncertainty and Monetary Policy in a Wage Bargaining Model," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(3), pages 443-455.
  • Handle: RePEc:bla:scandj:v:94:y:1992:i:3:p:443-55

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    References listed on IDEAS

    1. Robert C. Feenstra & Gene M. Grossman & Douglas A. Irwin (ed.), 1996. "The Political Economy of Trade Policy: Papers in Honor of Jagdish Bhagwati," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061864, July.
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    Cited by:

    1. Keith Blackburn & Alessandra Pelloni, 2005. "Growth, cycles, and stabilization policy," Oxford Economic Papers, Oxford University Press, vol. 57(2), pages 262-282, April.
    2. Sutherland, Alan, 2005. "Incomplete pass-through and the welfare effects of exchange rate variability," Journal of International Economics, Elsevier, vol. 65(2), pages 375-399, March.
    3. Rankin, Neil, 1998. "Nominal rigidity and monetary uncertainty," European Economic Review, Elsevier, vol. 42(1), pages 185-199, January.
    4. Steinar Holden, 2003. "Wage-setting under Different Monetary Regimes," Economica, London School of Economics and Political Science, vol. 70(278), pages 251-265, May.
    5. Rankin, Neil, 1998. "Nominal rigidity and monetary uncertainty in a small open economy," Journal of Economic Dynamics and Control, Elsevier, vol. 22(5), pages 679-702, May.
    6. The Pham, 2011. "Growth, volatility and stabilisation policy in a DSGE model with nominal rigidities and learning-by-doing," International Economics and Economic Policy, Springer, vol. 8(3), pages 307-322, September.
    7. Belke, Ansgar & Gros, Daniel, 2002. "Monetary integration in the Southern Cone," The North American Journal of Economics and Finance, Elsevier, vol. 13(3), pages 323-349, December.

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