{ "title": "Optimal Central Bank Conservatism and Monopoly Trade Unions", "publication": "IMF Working Papers, March 1, 2002", "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/optimal-central-bank-conservatism-and-monopoly-trade-unions-15664", "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/30/optimal-central-bank-conservatism-and-monopoly-trade-unions-15664", "overlayPath": "/en/publications/wp/issues/2016/12/30/optimal-central-bank-conservatism-and-monopoly-trade-unions-15664/index.md", "summary": "The \"conservative central banker\" has come under attack recently. On the basis of models in which there is explicit interaction between trade union behavior and monetary policy, it has been argued that if 'trade unions' are averse to inflation, welfare will be lower with a conservative than with a l", "sections": [ { "heading": "Main argument", "content": "- Reframes recent debates about the \"conservative central banker\" within a standard trade union model.\n- Examines models with explicit interaction between trade union behavior and monetary policy, focusing on whether conservatism of the central bank affects welfare when trade unions are averse to inflation." }, { "heading": "Key findings", "content": "- The case against the conservative central banker rests exclusively on the assumption of a strictly nominal outside option (for instance, unemployment benefits) for the union.\n- There is no welfare gain associated with making the central bank less conservative than society if the outside option is in real terms.\n- The nominal components of the trade union's outside option are mainly public transfers.\n- The conservative central banker is always optimal if the government can choose the level of nominal unemployment benefits as well as the degree of central bank conservatism." }, { "heading": "Policy implications and recommendations", "content": "- Policy conclusions about central bank conservatism depend critically on the nature of the union's outside option (nominal versus real).\n- When outside options include nominal public transfers, governments that can set nominal unemployment benefits should favor a conservative central banker to achieve optimality." }, { "heading": "Publication note", "content": "- Authors: Carsten Hefeker, Helge Berger, Ronnie Schlöb\n- Publication date: March 1, 2002\n- Pages: 29\n\nCarsten Hefeker, Helge Berger, and Ronnie Schlöb. \"Optimal Central Bank Conservatism and Monopoly Trade Unions\", IMF Working Papers 2002, 044 (2002), accessed 9/17/2026, https://doi.org/10.5089/9781451846423.001\n\n---\n\n Content in this bundle\n\n- Optimal Central Bank Conservatism and Monopoly Trade Unions - WP/02/44\n - Optimal Central Bank Conservatism and Monopoly Trade Unions - WP/02/44 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Optimal Central Bank Conservatism and Monopoly Trade Unions - WP/02/44 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/optimal-central-bank-conservatism-and-monopoly-trade-unions-15664" } ], "bullets": [ "[Markdown version](/en/publications/wp/issues/2016/12/30/optimal-central-bank-conservatism-and-monopoly-trade-unions-15664/index.md)", "[Structured JSON version](/en/publications/wp/issues/2016/12/30/optimal-central-bank-conservatism-and-monopoly-trade-unions-15664/index.json)", "[Bundle manifest](/en/publications/wp/issues/2016/12/30/optimal-central-bank-conservatism-and-monopoly-trade-unions-15664/bundle-manifest.json)", "Authors: Carsten Hefeker, Helge Berger, Ronnie Schlöb", "Published: March 1, 2002", "Series: IMF Working Papers", "DOI: https://doi.org/10.5089/9781451846423.001", "Reframes recent debates about the \"conservative central banker\" within a standard trade union model.", "Examines models with explicit interaction between trade union behavior and monetary policy, focusing on whether conservatism of the central bank affects welfare when trade unions are averse to inflation.", "The case against the conservative central banker rests exclusively on the assumption of a strictly nominal outside option (for instance, unemployment benefits) for the union.", "There is no welfare gain associated with making the central bank less conservative than society if the outside option is in real terms.", "The nominal components of the trade union's outside option are mainly public transfers.", "The conservative central banker is always optimal if the government can choose the level of nominal unemployment benefits as well as the degree of central bank conservatism.", "Policy conclusions about central bank conservatism depend critically on the nature of the union's outside option (nominal versus real).", "When outside options include nominal public transfers, governments that can set nominal unemployment benefits should favor a conservative central banker to achieve optimality.", "Authors: Carsten Hefeker, Helge Berger, Ronnie Schlöb", "Publication date: March 1, 2002", "Pages: 29", "**Optimal Central Bank Conservatism and Monopoly Trade Unions - 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