Monetary policy, central bank objectives, and social welfare with strategic wage setting |
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Authors: | Lawler P |
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Affiliation: | Department of Economics, University of Wales Swansea, Singleton Park, Swansea SA2 8PP, UK E-mail: p.lawler@swansea.ac.uk |
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Abstract: | The paper examines the implications of strategic wage-settingbehaviour by an inflation-averse monopoly union for the appropriatespecification of central bank objectives. Our principal findingsare as follows. First, the optimal setting of the parametersof the central bank's objective function differ in a significantway according to the relative timing of monetary policy andwage determination. Second, the ability of the central bankto precommit to a particular setting of monetary policy doesnot confer any welfare benefits. Third, we find little supportin this context for the notion that placing monetary policyin the hands of a conservative central bank will improve socialwelfare. |
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