Nominal Wage Flexibility, Wage Indexation and Monetary Union
AbstractMembership in a monetary union (EMU) is likely to imply stronger incentives for nominal wage flexibility in the form of wage indexation and shorter contract length than non-membership. For example, EMU entry may cause a move from a nonindexation to an indexation equilibrium. But more wage flexibility is only an imperfect substitute for an own monetary policy. It is possible that an increase in wage flexibility is welfare-decreasing, because of the accompanying rise in price variability. If indexation occurs outside the EMU, either multiple equilibria or full-indexation equilibria may occur.
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Bibliographic InfoPaper provided by Stockholm University, Institute for International Economic Studies in its series Seminar Papers with number 716.
Length: 31 pages
Date of creation: 14 Aug 2002
Date of revision:
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Postal: Institute for International Economic Studies, Stockholm University, S-106 91 Stockholm, Sweden
Web page: http://www.iies.su.se/
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nominal wage flexibility; wage indexation; EMU; asymmetric shocks;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-08-19 (All new papers)
- NEP-EEC-2002-08-19 (European Economics)
- NEP-IFN-2002-08-19 (International Finance)
- NEP-LTV-2002-08-08 (Unemployment, Inequality & Poverty)
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