Optimal central bank conservatism and monopoly trade unions

Arbeitspapier

The conservative central banker has come under attack recently. Explicitly modeling the interaction of a trade union with monetary policy, it has been argued that the standard solution to the inflationary bias in monetary policy might actually be welfare reducing if the trade union has an exogenously given preference against inflation. We reframe this discussion in a standard trade union model. We show that the case against the conservative central banker rests exclusively on the assumption of a strictly nominal outside option for the union. There is no welfare gain associated with making the central bank less conservative than society, however if the outside option is in real terms. As the nominal components of the trade union's outside option are mainly public transfers, we also show that the conservative central banker is always optimal if the government can choose the level of unemployment benefits as well as the degree of central bank conservatism.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Research Report ; No. 2000-14

Classification and Topics

• Classification: Wirtschaft ; Monetary Policy, Central Banking, and the Supply of Money and Credit: General ; Central Banks and Their Policies ; Labor-Management Relations, Trade Unions, and Collective Bargaining: General ; Trade Unions: Objectives, Structure, and Effects
• Subject: central bank ; monetary policy ; trade unions ; conservative central banker ; Geldpolitik ; Inflationsbekämpfung ; Lohnpolitik ; Lohnverhandlungstheorie ; Gewerkschaftspolitik ; Arbeitslosenversicherung ; Sozialtransfer ; Wohlfahrtsanalyse ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Berger, Helge ; Hefeker, Carsten ; Schöb, Ronnie
• Event: Veröffentlichung
• (who): The University of Western Ontario, Department of Economics
• (where): London (Ontario)
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/70366
• Last update: 10.03.2025, 11:42 AM CET