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Uncertainty, Wage Setting and Decision Making in a Monetary Union

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  • Carsten Hefeker

Abstract

The enlargement of the European Monetary Union is likely to lead to an increase in uncertainty regarding the transmission of monetary policy for the larger union. Adding new members to the central bank council will in addition imply that the policy reaction of the enlarged council will be uncertain in the initial period. The paper considers the influence of both types of uncertainty on wage-setting behavior in the larger monetary union and its effects on unemployment. In light of these effects, I also derive implications for the adequate structure of the central bank.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-06/cesifo1_wp1485.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1485.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1485

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Keywords: monetary policy uncertainty; wage setting; European Central Bank; Euro area; accession countries;

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References

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  1. Peter B. Kenen & Ellen E. Meade, 2003. "EU Accession and the Euro: Close Together or Far Apart?," Policy Briefs PB03-09, Peterson Institute for International Economics.
  2. Cukierman, A. & Lippi, F., 2000. "Labor Markets and Monetary Union: a Strategic Analysis," Papers, Banca Italia - Servizio di Studi 365, Banca Italia - Servizio di Studi.
  3. Ellen E. Meade & D. Nathan Sheets, 2002. "Regional Influences on U.S. Monetary Policy: Some Implications for Europe," CEP Discussion Papers dp0523, Centre for Economic Performance, LSE.
  4. Carsten Hefeker, 2001. "Federal Monetary Policy," CESifo Working Paper Series 422, CESifo Group Munich.
  5. Paul De Grauwe, 2000. "Monetary Policies in the Presence of Asymmetries," Journal of Common Market Studies, Wiley Blackwell, vol. 38(4), pages 593-612, November.
  6. S[empty]rensen, Jan Rose, 1991. "Political uncertainty and macroeconomic performance," Economics Letters, Elsevier, vol. 37(4), pages 377-381, December.
  7. Baldwin, Richard & Berglöf, Erik & Giavazzi, Francesco & Widgrén, Mika, 2000. "EU Reforms for Tomorrow’s Europe," CEPR Discussion Papers 2623, C.E.P.R. Discussion Papers.
  8. Rudi Dornbusch & Carlo Favero & Francesco Giavazzi, 1998. "Immediate challenges for the European Central Bank," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 13(26), pages 15-64, 04.
  9. Söderström, Ulf, 1999. "Monetary policy with uncertain parameters," Working Paper Series in Economics and Finance 308, Stockholm School of Economics.
  10. Elbourne, Adam & de Haan, Jakob, 2006. "Financial structure and monetary policy transmission in transition countries," Journal of Comparative Economics, Elsevier, vol. 34(1), pages 1-23, March.
  11. Paul De Grauwe & Marc-Alexandre Sénégas, 2003. "Monetary Policy in EMU when the Transmission is Asymmetric and Uncertain," CESifo Working Paper Series 891, CESifo Group Munich.
  12. Daniel Gros & Carsten Hefeker, 2002. "One Size Must Fit All: National Divergences in a Monetary Union," German Economic Review, Verein für Socialpolitik, Verein für Socialpolitik, vol. 3(3), pages 247-262, 08.
  13. Petra M. Geraats, 2002. "Central Bank Transparency," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(483), pages 532-565, November.
  14. Mojon, Benoît & Kashyap, Anil K. & Angeloni, Ignazio & Terlizzese, Daniele, 2002. "Monetary Transmission in the Euro Area : Where Do We Stand?," Working Paper Series 0114, European Central Bank.
  15. Helge Berger & Till Mueller, 2004. "How Should Large and Small Countries Be Represented in a Currency Union?," CESifo Working Paper Series 1344, CESifo Group Munich.
  16. Fidrmuc, Jarko & Iikka Korhonen, 2003. "Similarity of Supply and Demand Shocks Between the Euro Area and the CEECs," Royal Economic Society Annual Conference 2003, Royal Economic Society 77, Royal Economic Society.
  17. Rudiger Dornbusch & Carlo A. Favero & Francesco Giavazzi, 1998. "The Immediate Challenges for the European Central Bank," NBER Working Papers 6369, National Bureau of Economic Research, Inc.
  18. Benigno, Pierpaolo, 2001. "Optimal Monetary Policy in a Currency Area," CEPR Discussion Papers 2755, C.E.P.R. Discussion Papers.
  19. Helge Berger & Jakob Haan, 2002. "Are small countries too powerful within the ECB?," Atlantic Economic Journal, International Atlantic Economic Society, vol. 30(3), pages 263-282, September.
  20. Georgy Ganev & Krisztina Molnar & Krzysztof Rybinski & Przemyslaw Wozniak, 2002. "Transmission Mechanism of Monetary Policy in Centraland Eastern Europe," CASE Network Reports 0052, CASE-Center for Social and Economic Research.
  21. Grüner, Hans Peter, 2002. "How Much Should Central Banks Talk? A New Argument," CEPR Discussion Papers 3194, C.E.P.R. Discussion Papers.
  22. De Grauwe, Paul, 2000. "Monetary Policies In The Presence Of Asymmetries," CEPR Discussion Papers 2393, C.E.P.R. Discussion Papers.
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Cited by:
  1. Dirk Niepelt & Martin Gonzalez-Eiras, 2007. "Sustaining Social Security," 2007 Meeting Papers, Society for Economic Dynamics 95, Society for Economic Dynamics.
  2. Carsten Hefeker, 2006. "The monetary policy consequences of enlargement," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 7(4), pages 29-34, December.

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