Monetary institutions, monopolistic competition, unionized labor markets and economic performance

Fabrizio Coricelli*, Alex Cukierman, Alberto Dalmazzo

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review


Recent literature on the interactions between labor unions and monetary institutions features either a supply or a demand channel of monetary policy, but not both. This leads to two opposing views about the effects of central bank conservativeness. We evaluate the relative merits of those conflicting views by developing a unified framework. We find that: (i) the effect of conservativeness on employment depends on unions' relative aversion to unemployment versus inflation, and (ii) for plausible values of this relative aversion (and more than one union), social welfare is maximized under a highly conservative central bank. We also evaluate the effects of centralization of wage bargaining and product market competition on unemployment and inflation.

Original languageEnglish
Pages (from-to)39-63
Number of pages25
JournalScandinavian Journal of Economics
Issue number1
StatePublished - Mar 2006


  • Central bank conservativeness
  • Monopolistic competition
  • Real effects of monetary policy
  • Wage bargaining


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