UNIONS, FISCAL POLICY AND CENTRAL BANK TRANSPARENCY

To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1467-9957.2007.01033.x Byline: GIUSEPPE CICCARONE (1), ENRICO MARCHETTI (1), GIOVANNI DI BARTOLOMEO (2) 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. Author Affiliation: (1)University of Rome 'La Sapienza' (2)University of Teramo