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Wage Setting Under Different Monetary Regimes

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  • Steinar Holden

Abstract

In an economy with large wage setters (like industry unions), the monetary regime affects the trade-off between consumer real wages and employment and profits faced by the wage setters. This paper shows that an exchange rate target, including participation in a monetary union, is likely to involve lower wages in the traded sector, and higher wages in the non-traded sector, than does a price target. An exchange rate target also involves higher prices on non-traded goods relative to traded goods. Overall welfare is likely to be higher under a price target.

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  • Steinar Holden, 2002. "Wage Setting Under Different Monetary Regimes," CESifo Working Paper Series 632, CESifo.
    • Handle: RePEc:ces:ceswps:_632
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    Cited by:

    1. Calmfors, Lars & Larsson, Anna, 2009. "Pattern Bargaining and Wage Leadership in a Small Open Economy," Seminar Papers 760, Stockholm University, Institute for International Economic Studies.
    2. Vartiainen, Juhana, 1999. "Relative Wages in Monetary Union and Floating," Working Paper Series 155, Trade Union Institute for Economic Research.
    3. Ulf Söderström, 2010. "Reevaluating Swedish Membership in the European Monetary Union: Evidence from an Estimated Model," NBER Chapters, in: Europe and the Euro, pages 379-414, National Bureau of Economic Research, Inc.
    4. Kreickemeier, Udo & Meland, Frode, 2011. "International Trade, Union Wage Premia,and Welfare in General Equilibrium," Working Papers in Economics 04/11, University of Bergen, Department of Economics.
    5. Markus Knell, 2002. "Wage Formation in Open Economies and the Role of Monetary and Wage-Setting Institutions," Working Papers 63, Oesterreichische Nationalbank (Austrian Central Bank).
    6. Ulf Söderström, 2008. "Re-Evaluating Swedish Membership in EMU: Evidence from an Estimated Model," NBER Working Papers 14519, National Bureau of Economic Research, Inc.
    7. Gunnar Bardsen & Eilev S. Jansen & Ragnar Nymoen, 2003. "Econometric inflation targeting," Econometrics Journal, Royal Economic Society, vol. 6(2), pages 430-461, December.
    8. Aka, Bédia F. & P. Pieretti, 2008. "Wage Dynamics In A Structural Time Series Model For Luxembourg," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 5(2).
    9. Leitemo,K., 1999. "Inflation targeting strategies in small open economies," Memorandum 21/1999, Oslo University, Department of Economics.
    10. Markus Knell, 2002. "The effects of EMU on euro area unemployment," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(3), pages 244-262, September.

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    More about this item

    Keywords

    wage bargaining; monetary union; inflation target; monetary regime; equilibrium unemployment;
    All these keywords.

    JEL classification:

    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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