Macroeconomic shocks, unionized labour markets and central bank disclosure policy: How beneficial is increased transparency?

The paper investigates the implications of disclosure by the central bank to the private sector of information relating to the current realizations of macroeconomic disturbances. In the context of an economy in which the goods market is monopolistically competitive and where wages are set by atomistic unions, we find that greater precision of information provided to wage setters in respect of supply shocks has ambiguous welfare effects, both from the perspective of the social loss function and from the viewpoint of unions who act on the information. An important feature of the model is an externality in union wage setting which implies the outcome of the wage determination process is collectively inefficient.