The paper shows that a monetary policy regime that allows for a positive inflation rate disciplines monopolistic wages setters if these, when setting contracts, internalize the consequences of their choices for economic outcomes over the life of the contract. We also show that discretionary monetary policy has real effects when wage setters are non atomistic, whereas commitment to a positive inflation rate is effective irrespective of the degree of labor market centralization. Finally, the model may explain the different unemployment dynamics in Europe and in the United States, following the 1980 disinflationary episode. Our approach suggests that disinflation induced an adverse effect on the labor market wedge and that such effect was stronger in Europe, due to the particular importance of large wage setters. © 2012 Springer Science+Business Media, LLC.

Di Bartolomeo, G., Tirelli, P., Acocella, N. (2013). Trend inflation as a workers' discipline device. EMPIRICA, 40(2), 215-235 [10.1007/s10663-012-9183-x].

Trend inflation as a workers' discipline device

TIRELLI, PATRIZIO
Secondo
;
2013

Abstract

The paper shows that a monetary policy regime that allows for a positive inflation rate disciplines monopolistic wages setters if these, when setting contracts, internalize the consequences of their choices for economic outcomes over the life of the contract. We also show that discretionary monetary policy has real effects when wage setters are non atomistic, whereas commitment to a positive inflation rate is effective irrespective of the degree of labor market centralization. Finally, the model may explain the different unemployment dynamics in Europe and in the United States, following the 1980 disinflationary episode. Our approach suggests that disinflation induced an adverse effect on the labor market wedge and that such effect was stronger in Europe, due to the particular importance of large wage setters. © 2012 Springer Science+Business Media, LLC.
Articolo in rivista - Articolo scientifico
Discretionary monetary policy; Inflation bias; Non-zero inflation targeting; Strategic wage setters; Unemployment; Geography, Planning and Development; Development3304 Education
English
2013
40
2
215
235
none
Di Bartolomeo, G., Tirelli, P., Acocella, N. (2013). Trend inflation as a workers' discipline device. EMPIRICA, 40(2), 215-235 [10.1007/s10663-012-9183-x].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/61522
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