scholarly journals Wage Bargaining and Monetary Policy in a Kaleckian Monetary Distribution and Growth Model: Trying to Make Sense of the NAIRU

2006 ◽  
Vol 3 (2) ◽  
pp. 305-329 ◽  
Author(s):  
Eckhard Hein
Keyword(s):  
Monetary Policy ◽  
Growth Model ◽  
Wage Bargaining

scholarly journals The Deutsche Bundesbank's Concept of Monetary Policy, With Particular Reference to its Choice of Intermediate Variables in the Period 1972-1979

2021 ◽  
Author(s):  
◽  
Petrus Simons
Keyword(s):  
Monetary Policy ◽  
Public Sector ◽  
Foreign Capital ◽  
Bank Lending ◽  
Capital Formation ◽  
Wage Bargaining ◽  
Price Stability ◽  
Money Stock ◽  
Intermediate Target ◽  
Loan Rate

<p>The maintenance of price stability is the Bundesbank's ultimate objective. The memory of two hyperinflations within a 30-year period has made the fight against inflation of paramount social and political importance. In the Bank's view inflation engenders uncertainties which may jeopardise capital investment on which the competitiveness of German industry as well as full employment and economic growth depends. The Bundesbank pursues this goal by setting the marginal cost of central bank money required by the banks to finance their expansion. Thus, both the liquidity of the banking system and the cost of borrowing are controlled. This does not necessarily mean that the banks' loan rate of interest is the Bundesbank's Intermediate target. In fact, the Bank does not have one single intermediate target. Since the Bank's views of the monetary sector are manifested in the form of an interlocking system of financial variables, the selection of an appropriate intermediate target depends on the actual economic situation. In this context, the money stock supply (M3) is seen by the Bundesbank as functionally related to bank lending and the accumulation of long-term funds at the banks (monetary capital formation). An increase in interest rates would reduce bank lending, stimulate monetary capital formation and hence reduce the money stock supply (M3). In addition, it would check the utilisation of the money stock supply. This is seen as important because once money has entered the system it may generate unacceptable expenditure flows. To control the growth of the money stock supply, the Bundesbank relies on monetary capital formation, because small stocks of public debt rule out large-scale open market operations. In the Bank's view monetary policy should aim at keeping the banks' loan rate of interest as closely as possible to the natural rate. Lags in this Wicksellian transmission process may arise if the banks have ample margins between their loan and deposit rates when a restrictive monetary policy is implemented. As deposit rates adjust sooner than loan rates to a change in market rates, this also blunts the immediate impact of a policy change. The Bundesbank favours flexible rates of exchange in order to safeguard the financial system against inflows of foreign capital. It would welcome an appreciation of the D-Mark as a contribution to price stability, even though it could result in a loss of employment and exports as it stimulates German business to invest abroad. Furthermore, the Bank aims at constraining the monetary disturbances arising from public sector deficits and collective wage bargaining by means of its annual monetary growth target. This should serve as a signal to non-banks, which they are supposed to internalise in their decision-making. During the review period, the effectiveness of these safeguards was small as witnessed by inflows of foreign capital, large public sector deficits and excessive wage settlements. Moreover, the Bundesbank has been confronted with the development of parallel markets, in particular the Eurocurrency markets, in which borrowers can avoid the effects of its constraints.</p>

Monetary Policy in a Schumpeterian Growth Model with Two R&D Sectors

2021 ◽  
Author(s):  
Chien‐Yu Huang ◽  
Youchang Wu ◽  
Yibai Yang ◽  
Zhijie Zheng
Keyword(s):  
Monetary Policy ◽  
Growth Model ◽  
Schumpeterian Growth

Always a Winning Strategy? Wage Moderation’s Conditional Impact on Growth Outcomes

2020 ◽  
pp. 291-319
Author(s):  
Alison Johnston
Keyword(s):  
Growth Model ◽  
Growth Models ◽  
Winning Strategy ◽  
Labor Cost ◽  
Wage Bargaining ◽  
Wage Setting ◽  
Growth Outcomes ◽  
Wage Moderation ◽  
Comparative Capitalism ◽  
Export Shares

Wages and wage bargaining institutions are foundational components of comparative capitalism research. Supply-side comparative capitalism research has often assumed that wage moderation—facilitated through highly coordinated wage-setting institutions—produces beneficial growth outcomes. This supposition stems from the logic that restrained unit labor cost growth causes firms to increase employment and output. However, through its demand-side perspective, new growth model literature questions the virtues of wage moderation, because the restraint of wages can be detrimental to growth via its suppression of domestic consumption. This chapter empirically tests under what conditions will wage moderation produce economic growth. Using a first-difference, distributive lag panel analysis of eighteen OECD countries from 1970 to 2015, its findings largely resonate with predictions within the growth model literature. In the presence of wage restraint, countries with larger export shares and highly coordinated wage-setting institutions realize higher growth and lower unemployment than countries with smaller export shares and uncoordinated wage-setting institutions. In contrast, wage inflation produces better growth outcomes for countries with uncoordinated wage-setting, relative to those with highly coordinated wage-setting institutions. These results suggest that wage restraint is not a winning strategy for all growth models. Rather, wage moderation is associated with better growth (and unemployment) outcomes only for countries with export-led growth strategies.

scholarly journals HUMAN CAPITAL AND INNOVATION IN A MONETARY SCHUMPETERIAN GROWTH MODEL

2017 ◽  
Vol 23 (5) ◽  
pp. 1875-1894 ◽  
Author(s):  
Angus C. Chu ◽  
Lei Ning ◽  
Dongming Zhu
Keyword(s):  
Monetary Policy ◽  
Human Capital ◽  
Interest Rate ◽  
Growth Model ◽  
Growth Rates ◽  
Capital Accumulation ◽  
Nominal Interest Rate ◽  
Human Capital Accumulation ◽  
Schumpeterian Growth ◽  
Long Run

This study explores the growth and welfare effects of monetary policy in a scale-invariant Schumpeterian growth model with endogenous human capital accumulation. We model money demand via a cash-in-advance (CIA) constraint on research and development (R&D) investment. Our results can be summarized as follows. We find that an increase in the nominal interest rate leads to a decrease in R&D and human capital investment, which, in turn, reduces the long-run growth rates of technology and output. This result stands in stark contrast to the case of exogenous human capital accumulation in which the long-run growth rates of technology and output are independent of the nominal interest rate. Simulating the transitional dynamics, we find that the additional long-run growth effect under endogenous human capital accumulation amplifies the welfare effect of monetary policy. Decreasing the nominal interest rate from 10% to 0% leads to a welfare gain that is equivalent to a permanent increase in consumption of 2.82% (2.38%) under endogenous (exogenous) human capital accumulation.

scholarly journals Optimal fiscal and monetary policy with costly wage bargaining

2008 ◽  
Vol 55 (8) ◽  
pp. 1401-1414 ◽  
Author(s):  
David M. Arseneau ◽  
Sanjay K. Chugh
Keyword(s):  
Monetary Policy ◽  
Wage Bargaining ◽  
Fiscal And Monetary Policy
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