We study monetary policy when the labor-market insiders set the wage so that the outsiders are involuntarily unemployed. If the insiders are in the majority, the representative insider will be the median voter. Consequently, neither an independent nor a government-dependent central banker is...

This paper reexamines the inflation bias of time-inconsistent monetary policy. A benevolent government can eliminate the bias by using two policy instruments, instead of one. However, the time-inconstistency result can be kept formally, provided a non-benevolent government has the private...

This paper considers the optimal choice of the numeraire for the curency conversion that will constitute the final step in the transition from EMS to EMU. At the moment it seems to be understood that the current basket-structured ECU will be chosen for this purpose. We argue that this choice is...