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Wage-setting under Different Monetary Regimes

  • Steinar Holden

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 on traded goods. Overall welfare is likely to be higher under a price target. Copyright The London School of Economics and Political Science 2003.

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Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 70 (2003)
Issue (Month): 278 (05)
Pages: 251-265

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Handle: RePEc:bla:econom:v:70:y:2003:i:278:p:251-265
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