Information Content of Wages and Monetary Policy
18 Pages Posted: 17 Dec 2004
Date Written: July 2004
We examine whether it is sufficient for central banks to observe and forecast nominal variables only. Analyzing the interplay of wage-setting unions and a central bank we show that although central banks may not gain more information by directly acquiring data about indicators of real shocks in the economy, such activities are nevertheless beneficial for central banks and yield lower social losses. Moreover, the extent of research activities by central banks should depend on the process of union formation.
Keywords: Central Banks, Wage Bargaining, Information Asymmetries, Indicators for Monetary Policy, Controlling Inflation
JEL Classification: E50, E58, J51
Suggested Citation: Suggested Citation