Heterogenous Wage Formation Under A Common Monetary Policy
AbstractHow does a monetary union work when labour markets are heterogeneous? Since shocks are transmitted via both trade links and the common monetary policy and propagated via labour market responses, it follows that labour market institutions may have not only national but also union-wide implications. These issues are analysed in an intertemporal general equilibrium model for a currency union in which labour markets are heterogenous and where the monetary policy targets expected inflation. More flexibility in adjustment means more stable aggregate output, but inflation control becomes more difficult. Heterogeneity in adjustment plays a large role, in particular if country sizes are also asymmetric. This also holds in the case of aggregate shocks both for the variability of aggregate output and inflation. Considering the effects on country specific output variability it is seen that there are important spillover effects between labour market structures, and that it is not necessarily beneficial to make a unilateral move to make labour markets more flexible.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4430.
Date of creation: Jun 2004
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Find related papers by JEL classification:
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Arpaia, Alfonso & Pichelmann, Karl, 2007.
"Nominal and real wage flexibility in EMU,"
4364, University Library of Munich, Germany.
- Andersen, Torben M., 2008. "The macroeconomic policy mix in a monetary union with flexible inflation targeting," Journal of International Money and Finance, Elsevier, vol. 27(3), pages 411-437, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.