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Exchange Rate Regime and Wage Determination in Central and Eastern Europe

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  • Gunther Schnabl
  • Christina Ziegler

Abstract

After the eastern enlargement of the European Union due to increasing labor market integration, wage determination and monetary integration in Central and Eastern Europe have become key issues in European economic policy making. Based on the Scandinavian model of wage adjustment by Lindbeck (1979), we intend to analyze the role of exchange rates in the wage determination process of the Central and Eastern European countries to identify which exchange rate strategy contributes to faster wage convergence in Europe. Panel estimations reveal a robust negative relationship between exchange rates and wage growth. This suggests that workers in countries with fixed exchange rates are likely to benefit from higher wage increases.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2008/wp-cesifo-2008-11/cesifo1_wp2471.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2471.

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Date of creation: 2008
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Handle: RePEc:ces:ceswps:_2471

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Keywords: wage policy; labor markets; exchange rate regime; Central and Eastern Europe;

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References

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  1. Gunther Schnabl & Paul De Grauwe, 2004. "Nominal versus Real Convergence with Respect to EMU Accession - EMU Entry Scenarios for the New Member States," International Finance, EconWPA 0403008, EconWPA, revised 05 Jul 2004.
  2. Bergstrand, Jeffrey H, 1991. "Structural Determinants of Real Exchange Rates and National Price Levels: Some Empirical Evidence," American Economic Review, American Economic Association, American Economic Association, vol. 81(1), pages 325-34, March.
  3. Anders Forslund & Nils Gottfries & Andreas Westermark, 2006. "Real and Nominal Wage Adjustment in Open Economies," CESifo Working Paper Series 1649, CESifo Group Munich.
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  6. Choi, In, 2001. "Unit root tests for panel data," Journal of International Money and Finance, Elsevier, Elsevier, vol. 20(2), pages 249-272, April.
  7. Ronald McKinnon & Gunther Schnabl, 2006. "China's Exchange Rate and International Adjustment in Wages, Prices and Interest Rates: Japan Déjà Vu?," CESifo Economic Studies, CESifo, CESifo, vol. 52(2), pages 276-303, June.
  8. Schnabl, Gunther, 2008. "Exchange rate volatility and growth in small open economies at the EMU periphery," Economic Systems, Elsevier, Elsevier, vol. 32(1), pages 70-91, March.
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  20. Paul De Grauwe & Gunther Schnabl, 2008. "Exchange Rate Stability, Inflation, and Growth in (South) Eastern and Central Europe," Review of Development Economics, Wiley Blackwell, Wiley Blackwell, vol. 12(3), pages 530-549, 08.
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Cited by:
  1. Hoffmann, Andreas, 2009. "An Overinvestment Cycle in Central and Eastern Europe?," MPRA Paper 15668, University Library of Munich, Germany.
  2. Ziegler, Christina, 2012. "Monetary policy under alternative exchange rate regimes in Central and Eastern Europe," Working Papers, University of Leipzig, Faculty of Economics and Management Science 104, University of Leipzig, Faculty of Economics and Management Science.

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