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How Will EMU Affect Inflation and Unemployment in Europe?

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Author Info
Gruner, Hans Peter
Hefeker, Carsten

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Abstract

This paper explores how European Monetary Union will change the wage setting behavior of national labor unions. The authors derive the impact of national inflation aversion and labor militancy on the performance of national labor markets under different monetary arrangements. A common central bank raises inflation and unemployment if it acts as conservatively as national central banks. However, unemployment falls in countries that previously tied their monetary policy to the Bundesbank. The authors also examine the composition of EMU and the influence of national labor market legislation. Copyright 1999 by The editors of the Scandinavian Journal of Economics.

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Article provided by Blackwell Publishing in its journal Scandinavian Journal of Economics.

Volume (Year): 101 (1999)
Issue (Month): 1 (March)
Pages: 33-47
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Handle: RePEc:bla:scandj:v:101:y:1999:i:1:p:33-47

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