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Monopolistic Unions, Brainard Uncertainty, And Optimal Monetary Policy

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  • Timo Henckel

Abstract

Some authors have argued that multiplicative uncertainty may benefit society as the cautionary motive reduces the inflation bias. However, when there are non-atomistic wage setters, higher multiplicative uncertainty may raise the wage premium and unemployment and thus reduce welfare. Furthermore, since central bank preferences also affect the wage premium, delegating policy to an independent central banker with an optimal degree of conservatism cannot, in general, deliver a second-best outcome.

Suggested Citation

  • Timo Henckel, 2006. "Monopolistic Unions, Brainard Uncertainty, And Optimal Monetary Policy," CAMA Working Papers 2006-16, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2006-16
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    References listed on IDEAS

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    Cited by:

    1. Meixing Dai & Moïse Sidiropoulos, 2017. "How multiplicative uncertainty affects the tradeoff between information disclosure and stabilisation policy?," Working Papers of BETA 2017-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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