Money, Exchange Rates, Wages, and Games
1987 (English)Report (Other academic)
This paper is focused on the interaction of monetary policy and wage determination in open economies with strong labor unions. Applying some elements of game theory, the paper views both government and labor as endogenous utility maximizers, and studies the macroeconomic consequences af their interaction. In particular, the paper shows (a) how labor unions adjust wages optimally to prices following monetary expansion or devaluation; (b) how the ultimate effectiveness of policy is reduced (without necessarily being destroyed) by optimal union reactions; and (c) how the interplay of government and labor can create a persistent tendency to unemployment and inflation simultaneously.
Place, publisher, year, edition, pages
Stockholm: IIES , 1987. , 32 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 383
IdentifiersURN: urn:nbn:se:su:diva-41565OAI: oai:DiVA.org:su-41565DiVA: diva2:331181