Wage Bargaining and Monetary Policy in a Kaleckian Monetary Distribution and Growth Model: Trying to Make Sense of the NAIRU

In a Kaleckian monetary distribution and growth model with conflict inflation we assess the role of a Non-Accelerating Inflation Rate of Unemployment (NAIRU). The short-run stability of a NAIRU is examined taking into account real debt effects of accelerating and decelerating inflation, and the short-run effectiveness of monetary policy interventions applying the interest rate tool is analysed. The problem of long-run endogeneity of the NAIRU is addressed integrating the long-run distribution effects of monetary policies’ real interest rate variations into the model. It is concluded that monetary policy interventions in order to stabilise inflation are either unnecessary or costly in terms of employment in the short run. In the long run, these policies bear the risk of continuously increasing the NAIRU in order to keep inflation under control, which yields a horizontal long-run Phillips curve and latent stagflation. Instead of relying on monetary policies, the cause of inflation should be directly addressed and wage bargaining co-ordination should be applied as an appropriate tool.