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Wage Formation in Open Economies and the Role of Monetary and Wage-Setting Institutions

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Author Info
Markus Knell () (Oesterreichische Nationalbank, Economic Studies Division, Otto-Wagner Platz 3, POB 61, A-1011 Vienna)

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Abstract

The paper studies the determinants of unemployment in a two-country model, where real wages are the outcome of the strategic interaction between various institutional players (firms, unions, central banks). We show that: (i) the results derived in the recent literature on this topic are not generally robust against the introduction of openness; (ii) the shape of the Calmfors- Driffill curve not only depends on a country’s own centralization of wage-bargaining (CWB) but rather on home and foreign characteristics; (iii) the model challenges the established belief that a shift to a monetary union (MU) will (negatively) affect unemployment in all member countries by fundamentally changing the nature of strategic interactions. Under certain assumptions our open-economy model suggests that the formation of a MU has no effect whatsoever on structural unemployment.

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Publisher Info
Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 63.

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Length: 45 pages
Date of creation: 29 May 2002
Date of revision:
Handle: RePEc:onb:oenbwp:63

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Postal: P.O. Box 61, A-1011 Vienna, Austria
Phone: +43/1/404 20 7205
Fax: +43/1/404 20 7299
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Web page: http://www.oenb.at/
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Postal: Oesterreichische Nationalbank, Economic Studies Division, c/o Beate Hofbauer-Berlakovich, POB 61, A-1011 Vienna, Austria
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For technical questions regarding this item, or to correct its listing, contact: (Markus Knell and Helmut Stix).

Related research
Keywords: Wage-Setting Unemployment Monetary Union

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Find related papers by JEL classification:
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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  6. Cukierman, Alex & Lippi, Francesco, 1999. "Central bank independence, centralization of wage bargaining, inflation and unemployment:: Theory and some evidence," European Economic Review, Elsevier, vol. 43(7), pages 1395-1434, June. [Downloadable!] (restricted)
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  7. Bratsiotis, George & Martin, Christopher, 1999. " Stabilisation, Policy Targets and Unemployment in Imperfectly Competitive Economies," Scandinavian Journal of Economics, Blackwell Publishing, vol. 101(2), pages 241-56, June. [Downloadable!] (restricted)
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  8. Coricelli, Fabrizio & Cukierman, Alex & Dalmazzo, Alberto, 2001. "Economic Performance and Stabilization Policy in a Monetary Union with Imperfect Labour and Goods Markets," CEPR Discussion Papers 2745, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  12. Lippi, F., 2000. "Strategic Monetary Policy with Non-Atomistic Wage-Setters," Papers 374, Banca Italia - Servizio di Studi.
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  13. Burda, Michael C, 1999. "European Labour Markets and the Euro: How Much Flexibility Do We Really Need?," CEPR Discussion Papers 2217, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  14. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December. [Downloadable!] (restricted)
  15. Danthine, Jean-Pierre & Hunt, Jennifer, 1994. "Wage Bargaining Structure, Employment and Economic Integration," Economic Journal, Royal Economic Society, vol. 104(424), pages 528-41, May. [Downloadable!] (restricted)
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  16. Obstfeld, M., 1998. "Risk and Exchange Rate," Papers 193, Princeton, Woodrow Wilson School - Public and International Affairs.
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  17. Gruner, Hans Peter & Hefeker, Carsten, 1999. " How Will EMU Affect Inflation and Unemployment in Europe?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 101(1), pages 33-47, March. [Downloadable!] (restricted)
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  27. Lippi, Francesco, 1999. "Strategic Monetary Policy with Non-Atomistic Wage Setters: A Case for Non-Neutrality," CEPR Discussion Papers 2218, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Eduard Hochreiter & Klaus Schmidt-Hebbel & Georg Winckler, 2002. "Monetary Union: European Lessons, Latin American Prospects," Working Papers Central Bank of Chile 167, Central Bank of Chile. [Downloadable!]
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  2. Carsten Hefeker, 2002. "Lohnpolitik und Geldpolitik in Euroland," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 71(3), pages 354-367. [Downloadable!] (restricted)
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