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Non‐Atomistic Wage Setters and Monetary Policy in a New Keynesian Framework
Author(s) -
GNOCCHI STEFANO
Publication year - 2009
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/j.1538-4616.2009.00267.x
Subject(s) - economics , wage , new keynesian economics , inflation (cosmology) , monetary policy , wage bargaining , keynesian economics , monetary economics , affect (linguistics) , central bank , labour economics , physics , theoretical physics , linguistics , philosophy
This paper extends an otherwise standard New Keynesian (NK) model to allow for the presence of large wage setters. Building on monetary models from an earlier generation, I contribute to the NK literature by adding some new insight. It is shown that once the presence of large wage setters is taken into account, the degree of wage setting centralization and the aggressiveness of the central bank in stabilizing inflation jointly affect steady state employment. Because of this interaction, the benefits associated with inflation stabilization increase in the centralization of the wage bargaining process.