The paper demonstrates that policy makers may have a precautionary motive to undertake more labour-market reform - and hence attain lower equilibrium unemployment - inside a monetary union than outside. The reason is a desire to reduce the utility cost of variations in employment when asymmetric shocks can no longer be stabilised through domestic monetary policy.
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 174.
Find related papers by JEL classification: E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies E69 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Other F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions J29 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Other J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
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