Unions Power, Collective Bargaining and Optimal Monetary Policy
We study Ramsey policies and optimal monetary policy rules in a model with sticky prices and unionized labour markets. Collective wage bargaining and unions monopoly power dampen wage fluctuations and amplify employment fluctuations relatively to a DNK model. The optimal monetary policy must trade-off between stabilizing inflation and reducing inefficient unemployment fluctuations induced by unions' monopoly power. In this context the monetary authority uses inflation as a tax on unions' rents. The optimal monetary policy rule targets unemployment alongside inflation.
Year of publication: |
2010-10
|
---|---|
Authors: | Faia, Ester ; Rossi, Lorenza |
Institutions: | Dipartimento di Scienze Economiche e Aziendali, Università degli Studi di Pavia |
Saved in:
freely available
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