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Monetary strictness and labour market outcomes under incomplete transparency

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  • Sánchez, Marcelo

Abstract

This paper extends the workhorse model of strategic wage setting and monetary policy to the case of incomplete central bank transparency. In contrast with the existing literature, the paper shows that an increase in the degree of monetary strictness may lead to a simultaneous rise in real wages and unemployment. This is the likely outcome when the central bank's policies are perceived to be rather accommodating and unpredictable. When monetary policy is instead conducted in a conservative and transparent fashion, we obtain the standard result that greater monetary strictness induces wage discipline and lower unemployment.

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  • Sánchez, Marcelo, 2011. "Monetary strictness and labour market outcomes under incomplete transparency," Research in Economics, Elsevier, vol. 65(2), pages 95-99, June.
    • Handle: RePEc:eee:reecon:v:65:y:2011:i:2:p:95-99
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    References listed on IDEAS

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    Cited by:

    1. Sánchez, Marcelo, 2013. "Monetary accommodation, imperfect central bank transparency and optimal delegation," Economics Letters, Elsevier, vol. 120(3), pages 392-396.

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