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Monetary policy uncertainty and macroeconomic performance: An extended non-bayesian framework

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  • Daniel Laskar

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

The existing literature has shown that less political uncertainty, or more central bank transparency, may worsen macroeconomic performance by raising the nominal wage. We extend this analysis to a non-bayesian framework, where there is some aversion to ambiguity. We show that the result found in the literature under the bayesian approach does not hold when the distance from the bayesian case is large enough, or when a reduction in Knigtian uncertainty is considered. Then, less uncertainty, or more transparency of the central bank, does not raise the nominal wage and, as a consequence, macroeconomic performance is not worsened (and is in general strictly improved).

Suggested Citation

  • Daniel Laskar, 2008. "Monetary policy uncertainty and macroeconomic performance: An extended non-bayesian framework," PSE Working Papers halshs-00586883, HAL.
    • Handle: RePEc:hal:psewpa:halshs-00586883
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00586883
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    References listed on IDEAS

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    1. Gruener Hans Peter & Hayo Bernd & Hefeker Carsten, 2009. "Unions, Wage Setting and Monetary Policy Uncertainty," The B.E. Journal of Macroeconomics, De Gruyter, vol. 9(1), pages 1-25, October.
    2. Gruner, Hans Peter, 2002. "How much should central banks talk?: A new argument," Economics Letters, Elsevier, vol. 77(2), pages 195-198, October.
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