RESEARCH - 'Should central banks really be flexible?', by Hans Peter Gruner, October 2002. The paper looks at a model where risk averse trade unions interact with a central bank. Gruner shows that central bank flexibility is not necessarily desirable when it encourages trade unions to behave more aggressively. He finds that the overall welfare effect may be negative if central bank flexibility stabilises economic shocks and allows trade unions to realise higher real wages without risking