Central Banks, Trade Unions and Reputation – Is there Room for an Expansionist Manoeuvre in the European Union?
It is now a few years since the introduction of the common currency, and Europe is still experiencing high unemployment. The conventional logic attributes this problem to strong trade unions and other flaws in the labour market. This article takes a different approach. Using a game theoretic model we look at the changes that occur if trade unions and the central bank have different options to choose from in a climate of uncertainty. In a singlestage game the most probable outcome is a high unemployment rate as high as the NAIRU. However, there is also a slight chance that a central bank might take the risk associated with employment expansion (if trade unions cooperate the risk pays off). Moreover, results change dramatically if the game is repeated. This allows for effects on the trade union’s reputation. It can be shown that this, in turn, improves the likelihood of employment expansion.
|Date of creation:||01 Sep 2008|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.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.:
- Carlin, Wendy & Soskice, David, 2005. "Macroeconomics: Imperfections, Institutions, and Policies," OUP Catalogue, Oxford University Press, number 9780198776222, December.
- Kreps, David M & Wilson, Robert, 1982.
Econometric Society, vol. 50(4), pages 863-94, July.
- David Soskice & Torben Iversen, 2001. "Multiple Wage Bargaining Systems in the Single European Currency Area," Empirica, Springer, vol. 28(4), pages 435-456, December.
- Arne Heise, 2006.
"Limitations to Keynesian Demand Management through Monetary Policy: Whither Cartesian Policy Control?,"
in: Complexity, Endogenous Money and Macroeconomic Theory, chapter 18
Edward Elgar Publishing.
- Heise, Arne, 2004. "Limitations to Keynesian demand management through monetary policy: whither Cartesian policy control," Working Papers on Economic Governance 14, University of Hamburg, Department of Socioeconomics.
- Jürgen Jerger & Oliver Landmann, 2006. "Dissecting the Two-Handed Approach: Who’s the Expert Hand For What?," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 52(3), pages 50-70.
- Barro, Robert J & Gordon, David B, 1983.
"A Positive Theory of Monetary Policy in a Natural Rate Model,"
Journal of Political Economy,
University of Chicago Press, vol. 91(4), pages 589-610, August.
- Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
- Arne Heise, 2008. "European economic governance: what is it, where are we and where do we go?," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 3(1/2), pages 1-19.
- George A. Akerlof, 2007. "The Missing Motivation in Macroeconomics," American Economic Review, American Economic Association, vol. 97(1), pages 5-36, March.
- Rankin, Neil, 1995.
"Is Delegating Half of Demand Management Sensible?,"
The Warwick Economics Research Paper Series (TWERPS)
443, University of Warwick, Department of Economics.
- Jerger, Jurgen, 2002. "How strong is the case for a populist central banker? A note," European Economic Review, Elsevier, vol. 46(3), pages 623-632, March.
- Cukierman, A. & Lippi, F., 1998.
"Central Bank Independence, Centralization of Wage Bargaining, Inflation and Unemployment - Theory and Some Evidence,"
1998-116, Tilburg University, Center for Economic Research.
- Cukierman, Alex & Lippi, Francesco, 1999. "Central bank independence, centralization of wage bargaining, inflation and unemployment:: Theory and some evidence," European Economic Review, Elsevier, vol. 43(7), pages 1395-1434, June.
- Heise, Arne, 2005.
"Market constellations and macroeconomic policy-making: institutional impacts on economic performance,"
Working Papers on Economic Governance
18, University of Hamburg, Department of Socioeconomics.
- Arne Heise, 2006. "Market Constellations and Macroeconomic Policymaking: Institutional Impacts on Economic Performance," Intereconomics- Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 41(5), pages 272-281, September.
- James K. Galbraith, 1997. "Time to Ditch the NAIRU," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 93-108, Winter.
- Davidson, Paul, 1998. "Post Keynesian Employment Analysis and the Macroeconomics of OECD Unemployment," Economic Journal, Royal Economic Society, vol. 108(448), pages 817-31, May.
- David Kreps & Robert Wilson, 1999.
"Reputation and Imperfect Information,"
Levine's Working Paper Archive
238, David K. Levine.
- Guzzo, Vincenzo & Velasco, Andres, 1999. "The case for a populist Central Banker," European Economic Review, Elsevier, vol. 43(7), pages 1317-1344, June.
- Philippe Robert-Demontrond & R. Ringoot, 2004. "Introduction," Post-Print halshs-00081823, HAL.
- Heise, Arne, 2002. "EMU, coordinated macroeconomic policies and a boost to employment in the European Union," Working Papers on Economic Governance 1, University of Hamburg, Department of Socioeconomics.
- Soskice, David, 1990. "Wage Determination: The Changing Role of Institutions in Advanced Industrialized Countries," Oxford Review of Economic Policy, Oxford University Press, vol. 6(4), pages 36-61, Winter.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:19719. 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: (Joachim Winter)
If references are entirely missing, you can add them using this form.