The paper explores the consequences of economic integration on wage and monetary policy management. It studies the possibility that openness may discipline labor unions through potential losses created by the worsening in terms of trade (international competitiveness) associated with high wage claims. We find that, contrary to some recent literature, a monetary expansion fails to affect real outcomes and only results in higher inflation, since the claimed wage-moderation mechanism does not work when it is properly modeled. Hence, recent policy recommendations for an expansionary monetary policy in open economies result to be counterproductive, whereas low-inflation targeting remains a first best policy. (c) 2004 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.
Unions' inflation aversion and international competitiveness / DI BARTOLOMEO, Giovanni. - In: JOURNAL OF POLICY MODELING. - ISSN 0161-8938. - STAMPA. - 27:2(2005), pp. 137-142. [10.1016/j.jpolmod.2004.11.003]
Unions' inflation aversion and international competitiveness
DI BARTOLOMEO, Giovanni
2005
Abstract
The paper explores the consequences of economic integration on wage and monetary policy management. It studies the possibility that openness may discipline labor unions through potential losses created by the worsening in terms of trade (international competitiveness) associated with high wage claims. We find that, contrary to some recent literature, a monetary expansion fails to affect real outcomes and only results in higher inflation, since the claimed wage-moderation mechanism does not work when it is properly modeled. Hence, recent policy recommendations for an expansionary monetary policy in open economies result to be counterproductive, whereas low-inflation targeting remains a first best policy. (c) 2004 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.