Non-neutrality of monetary policy in policy games

This paper investigates the sources of non-neutrality in policy games involving one or more trade unions. We use a simple open economy model to demonstrate basic mechanisms that also arise in other frameworks. There are common roots in the non-neutrality results obtained in such apparently different contexts as, for example, an inflation-averse union playing against the government; a union sharing some other common objective with a policymaker; and when more than one union interacts with monopolistic competitors in the goods market and a policymaker.