We study Ramsey policies and optimal monetary policy rules in a DNK model with unionized labour markets. Collective wage bargaining and unions’ monopoly power amplify inefficient employment fluctuations. 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 and as a mean for indirect redistribution. Results are robust to the introduction of imperfect insurance on income shocks. The optimal monetary policy rule targets unemployment alongside inflation.
Unions Power, Collective Bargaining and Optimal Monetary
ROSSI, LORENZA
2013-01-01
Abstract
We study Ramsey policies and optimal monetary policy rules in a DNK model with unionized labour markets. Collective wage bargaining and unions’ monopoly power amplify inefficient employment fluctuations. 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 and as a mean for indirect redistribution. Results are robust to the introduction of imperfect insurance on income shocks. The optimal monetary policy rule targets unemployment alongside inflation.File in questo prodotto:
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