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Optimal Union Wage Setting Behaviour and the Non-neutrality of Anticipated Monetary Changes

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  • Naish, Howard F

Abstract

A model of optimal union wage setting behavior is developed in whic h anticipated monetary changes are not neutral in the short run. This result depends on two elements. First, fully anticipated monetary changes affect the variance of optimal forecasts. Second, changes in the variance of price forecasts lead to changes in real union behavior, provided that union utility functions are geometrically asymmetric, which, it is argued, will typically be the case. It is shown how, under certain conditions, a fully anticipated monetary contraction can actually lead to a higher nominal wage rate and price level. Copyright 1988 by Royal Economic Society.

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  • Naish, Howard F, 1988. "Optimal Union Wage Setting Behaviour and the Non-neutrality of Anticipated Monetary Changes," Oxford Economic Papers, Oxford University Press, vol. 40(2), pages 346-364, June.
    • Handle: RePEc:oup:oxecpp:v:40:y:1988:i:2:p:346-64
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    Cited by:

    1. Andersen, Torben M., 2001. "Active stabilization policy and uninsurable risks," Economics Letters, Elsevier, vol. 72(3), pages 347-354, September.
    2. Van Gompel, Johan, 1995. "Optimal wage indexation with exchange rate uncertainty in an oligopolistic and unionized economy," Economics Letters, Elsevier, vol. 48(1), pages 37-45, April.
    3. 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.
    4. Adriana Cassoni, 1996. "A bargaining model with uncertainty and varying outside opportunities," Documentos de Trabajo (working papers) 1096, Department of Economics - dECON.
    5. Mario Reyna-Cerecero & George Mavrotas, 2003. "Inflation, Output and Perfectly Enforceable Price Controls in Orthodox and Heterodox Stabilization Programmes," WIDER Working Paper Series DP2003-44, World Institute for Development Economic Research (UNU-WIDER).
    6. Naish, Howard F., 1995. "Keynesian real business cycles in a neoclassical framework," Journal of Economic Behavior & Organization, Elsevier, vol. 27(2), pages 183-211, July.

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