Journal Article

Strategic Monetary Policy with Non-Atomistic Wage Setters

Francesco Lippi

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 70, issue 4, pages 909-919
Published in print October 2003 | ISSN: 0034-6527
Published online October 2003 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.t01-1-00263
Strategic Monetary Policy with Non-Atomistic Wage Setters

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  • Macroeconomics: Consumption, Saving, Production, Employment, and Investment
  • Prices, Business Fluctuations, and Cycles
  • Monetary Policy, Central Banking, and the Supply of Money and Credit

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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: E24; E31; E52

Journal Article.  5140 words.  Illustrated.

Subjects: Macroeconomics: Consumption, Saving, Production, Employment, and Investment ; Prices, Business Fluctuations, and Cycles ; Monetary Policy, Central Banking, and the Supply of Money and Credit

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