Strategic monetary policy in a monetary union with non-atomistic wage setters

If we evaluate the (61) at the n∏ = 1 and β = O, we obtain

^[Ui,^N ^₌₀ = ^[Ui.l ^₌₀ =

It is apparent that expression (63) is greater (smaller) than expression (65) iff σ <
fcθN^j!∕β⅛F⅛≡h) ^l(^σ > λΘn I '>^βθF√''ι -)⁾- ^similarlY ^exP^{ression (64) is} g^{reater (smaller) than}
expression (65) iff σ < ɪɪ- (σ > ɪɪ-). Moreover relation (64) is always larger than rela-
tion (63). Recall that both an ultra-populist CB and atomistic wage setters lead the labor
demand elasticity to be equal to σ, i.e. the case of monopolistic competition. ■

References

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[2] Barro R., Gordon D. (1983), A positive theory of monetary policy in a natural rate
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[3] Blanchard 0.J., Kiyotaki (1987), Monopolistic competition and the effects of aggre-
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[5] Calmfors L. (1993), Centralization of wage bargaining and macroeconomic perfor-
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[6] Camfors L. (2001), Wage and wage bargaining institutions in EMU: A survey of the
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[7] Cavallari L. (2004), Inflationary performance in a monetary union with large wage
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