publication . Preprint . 1998

Central Bank Independence, Centralization of Wage Bargaining, Inflation and Unemployment - Theory and Evidence

Alex Cukierman; Francesco Lippi;
Open Access
  • Published: 01 Mar 1998
This paper proposes a conceptual framework that makes it possible to investigate the effects of central bank independence, the degree of centralization of wage bargaining and the interaction between those institutional variables on the real wage, unemployment and inflation. This is done by considering a two-stage strategic interaction between a central bank (CB) with a given degree of conservativeness and a number of unions each of which sets its own nominal wage taking the nominal wages of other unions and the reaction-function of the CB as given. In the second stage the CB picks inflation so as to minimize the combined costs of inflation and unemployment, taki...
free text keywords: centralization of bargaining; Credibility; industrial organization of labour markets; Inflation; monetary policy institutions; Unemployment, Monetary institutions; Credibility; Industrial organization of labor markets; Centralization of wage bargaining; Inflation; Unemployment, jel:E50, jel:E58, jel:J50, jel:J51
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