Unions, Fiscal Policy and Central Bank Transparency

17 Pages Posted: 24 Aug 2007

See all articles by Giuseppe Ciccarone

Giuseppe Ciccarone

University of Rome I - Department of Public Economics

Enrico Marchetti

University of Rome - La Sapienza

Giovanni Di Bartolomeo

Sapienza University of Rome, Department of Economics and Law

Abstract

In a unionized economy with endogenous fiscal policy central bank transparency has two contrasting effects on wages, the relative strength of which determines the macroeconomic performance. This finding allows us to demonstrate that (i) if the central bank is populist the effect of transparency is negative, and (ii) if policy makers are sufficiently conservative and the government is active, transparency decreases inflation and unemployment, but opposite results apply if a populist government faces a tight fiscal constraint. Macroeconomic volatility disappears with full transparency and increases, in general, with opacity, but the relationship is hump-shaped when the central bank is strongly populist.

Suggested Citation

Ciccarone, Giuseppe and Marchetti, Enrico and Di Bartolomeo, Giovanni, Unions, Fiscal Policy and Central Bank Transparency. Manchester School, Vol. 75, No. 5, pp. 617-633, September 2007. Available at SSRN: https://ssrn.com/abstract=1007860 or http://dx.doi.org/10.1111/j.1467-9957.2007.01033.x

Giuseppe Ciccarone (Contact Author)

University of Rome I - Department of Public Economics ( email )

Via del Castro Laurenziano 9
Rome, 00161
Italy

HOME PAGE: http://dep.eco.uniroma1.it/~ciccaron/

Enrico Marchetti

University of Rome - La Sapienza ( email )

via del Castro Laurenziano, 9
Rome, RM 00161
Italy

Giovanni Di Bartolomeo

Sapienza University of Rome, Department of Economics and Law ( email )

via Castro del Laurenziano 9
Roma, 00191
Italy

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