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Macroeconomic Policy, Wage Setting, and Employment--What Difference Does the EMU Make?

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  • Calmfors, Lars
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    Abstract

    The likely impact of the EMU on the variability and level of employment is analysed. The major conclusions are as follows. (i) Although an inflation-target regime will constrain monetary policy of a non-participant in the EMU, it still leaves considerable scope for exchange-rate changes in the case of country-specific demand shocks, provided that there is some nominal price and wage flexibility. (ii) Variations in payroll taxes can be used as a substitute for exchange-rate changes in the EMU, but it will be an imperfect substitute. (iii) Money-wage flexibility is likely to be larger inside than outside the EMU, but probably not by much. (iv) There are various mechanisms through which the EMU may affect the incentives for labour-market reform to reduce equilibrium unemployment, but the net impact is highly uncertain. Copyright 1998 by Oxford University Press.

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    Bibliographic Info

    Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

    Volume (Year): 14 (1998)
    Issue (Month): 3 (Autumn)
    Pages: 125-51

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    Handle: RePEc:oup:oxford:v:14:y:1998:i:3:p:125-51

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    Cited by:
    1. Christopher Allsopp, 2002. "The Future of Macroeconomic Policy in the European Union," Discussion Papers, Monetary Policy Committee Unit, Bank of England 07, Monetary Policy Committee Unit, Bank of England.
    2. Sotirios Theodoropoulos, 2011. "A Wage Policy for External Balance and Employment in EMU Environment: A Theoretical Approach," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 61(3-4), pages 85-102, July - De.
    3. Benigno, Pierpaolo, 2001. "Optimal Monetary Policy in a Currency Area," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2755, C.E.P.R. Discussion Papers.
    4. Tito Boeri & Giuseppe Nicoletti & Stefano Scarpetta, . "Regulation and Labour Market Performance," Working Papers 158, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    5. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and the long run? - Alfonso Arpaia and Giuseppe Carone," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 216, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
    6. Bokan, Nikola & Hughes Hallett, Andrew, 2006. "Labour and Product Market Reforms in the Economy with Distortionary Taxation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5431, C.E.P.R. Discussion Papers.
    7. Barbara Annicchiarico & Fabio Di Dio & Francesco Felici, 2014. "Fiscal Devaluation Scenarios: A Quantitative Assessment for the Italian Economy," CEIS Research Paper 311, Tor Vergata University, CEIS, revised 09 Apr 2014.
    8. Bernd Hayo & Hans Peter Gruner & Carsten Hefeker, 2004. "Monetary policy uncertainty and unionized labour markets," Money Macro and Finance (MMF) Research Group Conference 2003 42, Money Macro and Finance Research Group.
    9. Grüner, Hans Peter, 2010. "Why EMU is not a failure," European Journal of Political Economy, Elsevier, vol. 26(1), pages 1-11, March.
    10. Hughes Hallett, Andrew & Weymark, Diana, 2002. "The Cost of Heterogeneity in a Monetary Union," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3223, C.E.P.R. Discussion Papers.
    11. Ruud de Mooij & Michael Keen, 2012. "'Fiscal Devaluation' and Fiscal Consolidation: The VAT in Troubled Times," NBER Working Papers 17913, National Bureau of Economic Research, Inc.

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