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A Union‐bashing Model of Inflation Targeting

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  • Frode Meland

Abstract

This paper shows that in an open two‐sector economy, centralization of wage setting may be important in determining the employment (and welfare) effects of different monetary targets. By disciplining unions in the sectors open to international trade, exchange rate targeting yields higher employment than inflation targeting when wage‐setting is more centralized in the open sector than in the shielded sector. When wage‐setting centralization is higher in the shielded sector, we show that general price‐level inflation targeting, while better than exchange rate targeting, is inferior to an inflation target that focuses more heavily on shielded sector prices.

Suggested Citation

  • Frode Meland, 2006. "A Union‐bashing Model of Inflation Targeting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(3), pages 419-432, October.
    • Handle: RePEc:bla:scandj:v:108:y:2006:i:3:p:419-432
    DOI: 10.1111/j.1467-9442.2006.00465.x
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    Cited by:

    1. Udo Kreickemeier & Frode Meland, 2017. "Non-Traded Goods, Globalization, and Union Influence," World Scientific Book Chapters, in: International Trade and Labor Markets Welfare, Inequality and Unemployment, chapter 7, pages 173-201, World Scientific Publishing Co. Pte. Ltd..
    2. Kreickemeier, Udo & Meland, Frode, 2011. "International Trade, Union Wage Premia,and Welfare in General Equilibrium," Working Papers in Economics 04/11, University of Bergen, Department of Economics.
    3. Wenlang Zhang & Gaofeng Han, 2013. "How have Labour Market Developments Affected Labour Costs in China?," Working Papers 072013, Hong Kong Institute for Monetary Research.
    4. Nasir, Muhammad Ali & Huynh, Toan Luu Duc & Yarovaya, Larisa, 2020. "Inflation targeting & implications of oil shocks for inflation expectations in oil-importing and exporting economies: Evidence from three Nordic Kingdoms," International Review of Financial Analysis, Elsevier, vol. 72(C).

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