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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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number
CESifo Working Paper No. 2471.
Find related papers by JEL classification: C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data F31 - International Economics - - International Finance - - - Foreign Exchange J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
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