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The welfare effect of foreign monetary conservatism with non-atomistic wage setters

Author

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  • Vincenzo Cuciniello

    (Chair of International Finance, Ecole Polytechnique Federale de Lausanne (EPFL), Switzerland)

Abstract

This paper sheds light on the real effects of foreign central bank’s degree of inflation aversion in presence of non-atomistic wage setters. It extends the Lippi’s (2003) framework to an open economy and identifies the key strategic mechanisms between monetary policy and wage-setting decisions so as to assess the real effects of domestic and foreign policy makers’ aversion to inflation. A main finding is that foreign central bank’s aversion to inflation always increases employment. The impact of domestic central bank’s aversion to inflation instead depends on the combination of three strategic effects.

Suggested Citation

  • Vincenzo Cuciniello, 2009. "The welfare effect of foreign monetary conservatism with non-atomistic wage setters," Working Papers 200908, Center for Fiscal Policy, Swiss Federal Institute of Technology Lausanne.
  • Handle: RePEc:cif:wpaper:200908
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    References listed on IDEAS

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    Cited by:

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    3. Cuciniello, Vincenzo & Lambertini, Luisa, 2016. "Optimal exchange rate flexibility with large labor unions," Journal of International Money and Finance, Elsevier, vol. 63(C), pages 112-136.
    4. Vincenzo Cuciniello & Federico M. Signoretti, 2015. "Large Banks, Loan Rate Markup, and Monetary Policy," International Journal of Central Banking, International Journal of Central Banking, vol. 11(3), pages 141-177, June.
    5. Giovanni Di Bartolomeo, 2014. "Optimal Degree of Union Centralization," Studies in Microeconomics, , vol. 2(2), pages 201-211, December.
    6. Emiliano Brancaccio & Nadia Garbellini, 2015. "Currency regime crises, real wages, functional income distribution and production," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 12(3), pages 255-276, December.

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    More about this item

    Keywords

    Foreign central bank conservatism; centralized wage setting; open-economy macro;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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