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Monopolistic unions, Brainard uncertainty, and optimal monetary policy

  • Timo Henckel

Some authors have argued that multiplicative uncertainty may benefit society as the cautionary motive reduces the inflation bias. However, when there are non-atomistic wage setters, higher multiplicative uncertainty may raise the wage premium and unemployment and thus reduce welfare. Furthermore, since central bank preferences also affect the wage premium, delegating policy to an independent central banker with an optimal degree of conservatism cannot deliver a second-best outcome. Copyright 2010 , Oxford University Press.

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Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 62 (2010)
Issue (Month): 2 (April)
Pages: 307-322

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Handle: RePEc:oup:oxecpp:v:62:y:2010:i:2:p:307-322
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  1. Francesco Lippi, 2003. "Strategic Monetary Policy with Non-Atomistic Wage Setters," CEIS Research Paper 17, Tor Vergata University, CEIS.
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