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Revisiting the case for a populist central banker

Lippi, Francesco (2002) Revisiting the case for a populist central banker. European Economic Review, Vol. 46 (3), p. 601-612. ISSN 0014-2921. Article.

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DOI: 10.1016/S0014-2921(00)00098-2


It is known that discretionary policy may give rise to an inflationary bias if wages are negotiated in nominal terms. In a recent issue of this Review, Guzzo and Velasco argued that this bias can be eliminated, and welfare maximized, by the appointment of a central banker who does not care at all about inflation (a ‘populist’ central banker). A conceptual flaw of the latter result is identified here. It is shown that when wages are negotiated in nominal terms the result is true only in the special case of a single, all-encompassing, union. In the more general case of multiple unions, however, inflation increases linearly with their number and a populist central bank may turn out to decrease welfare.

Item Type:Article
ID Code:2357
Uncontrolled Keywords:Central bank conservatism, nominal wage bargaining, centralization of wage bargaining, credibility, inflation, unemployment
Subjects:Area 13 - Scienze economiche e statistiche > SECS-P/01 Economia politica
Divisions:001 Università di Sassari > 01 Dipartimenti > Economia, impresa, regolamentazione
Deposited On:18 Aug 2009 10:07

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