Trend inflation as a workers disciplining device in a general equilibrium model

In New Keynesian models nominal rigidities determine socially ineffi - cient outcomes. Our paper reverses this view: properly designed monetary policies may take advantage of predetermined nominal wages to discipline monopolistic wage setters. This, in turn, requires accepting a non-zero in- flation rate. Discretionary monetary policy is effective when wage setters are non atomistic. Inflation targeting has real effects irrespective of the degree of labor market centralization.

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Year of publication:	2008-07
Authors:	Bartolomeo, Giovanni Di ; Tirelli, Patrizio ; Acocella, Nicola
Institutions:	Dipartimento di Economia, Metodi Quantitativi e Strategie d'Impresa (DEMS), Facoltà di Economia
Subject:	inflation bias \| discretionary monetary policy \| non-zero inflation targeting \| unemployment \| strategic wage setters

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Extent:	application/pdf
Series:	Working Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 142 25 pages
Classification:	E52 - Monetary Policy (Targets, Instruments, and Effects) ; E58 - Central Banks and Their Policies ; J51 - Trade Unions: Objectives Structure, and Effects ; E24 - Employment; Unemployment; Wages
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005432596