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| Author: | Skott, P. |
| Title: | Stagflationary consequences of prudent monetary policy in a unionized economy |
| Journal: | Oxford Economic Papers
1997 : OCT, Vol. 49:4, p. 609-622 |
| Index terms: | STAGFLATION MONETARY POLICY EMPLOYMENT |
| Language: | eng |
| Abstract: | Stylised models of the policy game between monetary policy makers and the private sector have suggested that discretionary policy regimes suffer from an inherent inflationary bias and that pre-commitment to a target rate of inflation may be desirable. This paper shows that in the presence of labour unions, the monetary policy game can lead to radically different results: a central bank that is completely indifferent to the level of inflation may obtain outcomes with high employment rates and zero inflation while "prudent" , inflation-averse, central banks generate stagflation with positive inflation and low rates of employment. |
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