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The Welfare Effect of Foreign Monetary Conservatism with Nonatomistic Wage Setters
Author(s) -
CUCINIELLO VINCENZO
Publication year - 2011
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.1538-4616.2011.00465.x
Subject(s) - conservatism , economics , wage , monetary policy , moderation , open economy , central bank , monetary economics , welfare , international economics , market economy , political science , exchange rate , politics , psychology , social psychology , law
This paper extends the closed‐economy analysis of strategic interaction between labor unions and the monetary authority in Lippi (2003) to a two‐country, open‐economy framework. It sheds light on the real effect of foreign central bank conservatism, which—through a strategic mechanism that operates via the terms of trade between the two independent monetary policymakers—entails wage moderation. The impact of domestic central bank conservatism hinges instead on the combination of three strategic effects.