Strategic Monetary Policy with Non-Atomistic Wage Setters
CEIS Research Paper
Monetary policy analyses usually assume an atomistic private sector, thereby ignoring potential interactions between policy and wage-setting decisions. Yet, non-atomistic wage setters are a key feature of several industrialized economies. We study the economic consequence of non-atomistic agents and show that this qualifies previous results on the effects and desirability of a conservative central banker. In particular, the central bank aversion to inflation may have a permanent effect on structural employment, while no such effect emerges with atomistic agents.
Keywords: conservatism, non-atomistic agents, wage-setting
JEL codes: E5, J5
Date: Thursday, May 22, 2003
Revision Date: Thursday, May 22, 2003