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The Monetary Instrument in a Unionised Economy: Flexible Inflation Targeting versus Fixed Money Growth

Author

Listed:
  • Marcelo Sánchez

    (European Central Bank, Frankfurt am Main, Germany)

Abstract

This paper finds mixed results about the relative performance of the two alternative monetary targeting arrangements here considered (unconditional and conditional). Unconditional monetary targeting (given by fixed money growth) may have an advantage in disciplining unions and thus reducing labour market distortions, and may be perceived to be more transparent. Conditional monetary targeting, which relies on a policy rule that responds to shocks, may be an especially attractive regime when unpredictable events introduce too much macroeconomic variability and when the unconditional approach fails to elicit the best response from the private sector (in terms of collective bargaining and/or transparency perceptions).

Suggested Citation

  • Marcelo Sánchez, 2011. "The Monetary Instrument in a Unionised Economy: Flexible Inflation Targeting versus Fixed Money Growth," Rivista di Politica Economica, SIPI Spa, issue 3, pages 393-414, JULY-SEPT.
    • Handle: RePEc:rpo:ripoec:y:2011:i:3:p:393-414
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    More about this item

    Keywords

    monetary targeting; optimal monetary policy; collective bargaining;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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