Wage formation and monetary policy rules
This paper characterizes the wage setting behavior in a totally unionized economy under different monetary policy rules. The wage formation strategy of the union can be either aggressive or cooperative.. As long as the union is fully cooperative and in the absence of shocks, the government can completely reach its macroeconomic targets: full employment and price stability. If, however, the union becomes aggressive, a constant money supply rule has a nominal wage inflation bias under certain plausible- assumptions. By changing the rules of the game, e.g. following a nominal GNP or price level (inflation) rule, wage demands would be lower and the economy better off.
|Date of creation:||1992|
|Date of revision:|
|Contact details of provider:|| Postal: Kiellinie 66, D-24105 Kiel|
Phone: +49 431 8814-1
Fax: +49 431 85853
Web page: http://www.ifw-kiel.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Meade, James E, 1993.
"The Meaning of "Internal Balance.","
American Economic Review,
American Economic Association, vol. 83(6), pages 3-9, December.
- Scheide, Joachim, 1989. "A k-percent rule for monetary policy in West Germany," Open Access Publications from Kiel Institute for the World Economy 1396, Kiel Institute for the World Economy (IfW).
- Tabellini, Guido, 1988.
"Centralized Wage Setting and Monetary Policy in a Reputational Equilibrium,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 20(1), pages 102-18, February.
- Guido Tabellini, 1985. "Centralized Wage Setting and Monetary Policy in a Reputational Equilibrium," UCLA Economics Working Papers 369, UCLA Department of Economics.
- Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
- Victor E. Argy, 1991. "Nominal Income Targeting; A Critical Evaluation," IMF Working Papers 91/92, International Monetary Fund.
- Joachim Scheide, 1989. "A K-percent rule for monetary policy in West Germany," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 125(2), pages 326-336, June.
- Frankel, Jeffrey A., 1991.
"The Stabilizing Properties of a Nominal GNP Rule in an Open Economy,"
Department of Economics, Working Paper Series
qt7xz9d77c, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Jeffrey A. Frankel and Menzie Chinn., 1991. "The Stabilizing Properties of a Nominal GNP Rule in an Open Economy," Economics Working Papers 91-166, University of California at Berkeley.
- Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-91, June.
- Bennett T. McCallum, 1987. "The case for rules in the conduct of monetary policy: a concrete example," Economic Review, Federal Reserve Bank of Richmond, issue Sep, pages 10-18.
When requesting a correction, please mention this item's handle: RePEc:kie:kieliw:514. 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: (Dieter Stribny)
If references are entirely missing, you can add them using this form.