Strategic Monetary Policy with Non-Atomistic Wage Setters: A Case for Non-Neutrality
The literature on monetary policy games establishes that policy makers' attempts to boost employment above the 'natural' rate are futile and result in an inflationary bias when wage setters have rational expectations and the policy maker cannot precommit. This implies that a variation of the policy maker's degree of inflation aversion does not have a systematic effect on the employment level. This paper shows that this last neutrality result hinges crucially on the assumption that wage setters are atomistic. In the presence of non-atomistic agents, who set nominal wages and have monopolistic power, the policy maker's inflation aversion may have a systematic effect on equilibrium employment even if agents have rational expectations and complete information. The model is used to re-assess the welfare implications of monetary policy delegation to a 'conservative' central bank.
|Date of creation:||Aug 1999|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2218. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.