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How Will EMU Affect Inflation and Unemployment in Europe?

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  • Hans Peter Grüner
  • Carsten Hefeker

Abstract

This paper explores how European Monetary Union will change the wage setting behavior of national labor unions. We derive the impact of national inflation aversion and labor militancy on the performance of national labor markets under different monetary arrangements. A common central bank raises inflation and unemployment if it acts as conservatively as national central banks. However, unemployment falls in countries that previously tied their monetary policy to the Bundesbank. We also examine the composition of EMU and the influence of national labor market legislation. JEL Classification: E24; F02; F33

Suggested Citation

  • Hans Peter Grüner & Carsten Hefeker, 1999. "How Will EMU Affect Inflation and Unemployment in Europe?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 33-47, March.
    • Handle: RePEc:bla:scandj:v:101:y:1999:i:1:p:33-47
    DOI: 10.1111/1467-9442.00139
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    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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