If we evaluate the (61) at the n∏ = 1 and β = O, we obtain
and
oβ
[Ui,N ]n^-ɪ 2⅛
/ k^βp θf ∖2
∖1Nn +βFΘf(ɪ-ɑɔ J
(63)
(64)
[Ui,N ^=0 = [Ui.l ^=0 =
(65)
It is apparent that expression (63) is greater (smaller) than expression (65) iff σ <
fcθNj!∕β⅛F⅛≡h) l(σ > λΘn I '>βθF√''ι -))- similarlY exPression (64) is greater (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
[1] Acocella N., Di Bartolomeo G. (2004), Non-neutrality of monetary policy in policy
games, European Journal of Political Economy, 20(3), pp. 695-707.
[2] Barro R., Gordon D. (1983), A positive theory of monetary policy in a natural rate
model, Journal of Political Economy 91, pp. 589-610.
[3] Blanchard 0.J., Kiyotaki (1987), Monopolistic competition and the effects of aggre-
gate demand, American Economic Review, 77, pp. 722-45.
[4] Calmfors L., Driffill J. (1988), Bargaining structure, corporatism, and macroeconomic
performance, Economic Policy, pp. 14-61.
[5] Calmfors L. (1993), Centralization of wage bargaining and macroeconomic perfor-
mance - A survey, OECD Economic Studies 21, pp. 161-91.
[6] Camfors L. (2001), Wage and wage bargaining institutions in EMU: A survey of the
issues, Empirica, 28, pp.325-51.
[7] Cavallari L. (2004), Inflationary performance in a monetary union with large wage
setters, Monetary Policy, Fiscal Policy and Labour Markets. Macroeconomic Policy-
making in the EMU edited by Beetsma R., Favero C., Missale A., Muscatelli A.,
Natale P. and P. Tirelli, Cambridge University Press, Cambridge.
35
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