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Monopolistic Unions, Brainard Uncertainty, and Optimal Monetary Policy

Henckel, Timo


Some authors have argued that multiplicative uncertainty may benefit society as the cautionary motive reduces the inflation bias. However, when there are nonatomistic wage setters, higher multiplicative uncertainty may raise the wage premium and unemployment and thus reduce welfare. Furthermore, since central bank preferences also affect the wage premium, delegating policy to an independent central banker with an optimal degree of conservatism cannot deliver a second-best outcome.

CollectionsANU Research Publications
Date published: 2009
Type: Journal article
Source: Oxford Economic Papers
DOI: 10.1093/oep/gpp011


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