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Why EMU is not a failure

  • Grüner, Hans Peter
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    About a decade ago, papers by Grüner and Hefeker (1999) and Cukierman and Lippi (2001) predicted that European Monetary Union may lead to higher inflation and unemployment in some participating countries. Meanwhile, we know that these predictions have not come true. The present paper develops a model of trade union behavior that explains why EMU was more successful than we predicted. The paper also sheds new light on the macroeconomic role of central bank flexibility.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0176-2680(09)00085-8
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    Article provided by Elsevier in its journal European Journal of Political Economy.

    Volume (Year): 26 (2010)
    Issue (Month): 1 (March)
    Pages: 1-11

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    Handle: RePEc:eee:poleco:v:26:y:2010:i:1:p:1-11
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505544

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    1. Skott, Peter, 1997. "Stagflationary Consequences of Prudent Monetary Policy in a Unionized Economy," Oxford Economic Papers, Oxford University Press, vol. 49(4), pages 609-22, October.
    2. Berthold Herrendorf & Manfred J.M. Neumann, 2003. "The Political Economy of Inflation, Labour Market Distortions and Central Bank Independence," Economic Journal, Royal Economic Society, vol. 113(484), pages 43-64, January.
    3. Walsh, Carl E, 1995. "Is New Zealand's Reserve Bank Act of 1989 an Optimal Central Bank Contract?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 1179-91, November.
    4. Gruner, Hans Peter & Hefeker, Carsten, 1999. " How Will EMU Affect Inflation and Unemployment in Europe?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(1), pages 33-47, March.
    5. Ansgar Belke & Daniel Gros, 2005. "Is A Unified Macroeconomic Policy Necessarily Better for a Common Currency Area?," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 266/2005, Department of Economics, University of Hohenheim, Germany.
    6. S[empty]rensen, Jan Rose, 1991. "Political uncertainty and macroeconomic performance," Economics Letters, Elsevier, vol. 37(4), pages 377-381, December.
    7. Berger, Helge & de Haan, Jakob & Eijffinger, Sylvester C W, 2000. "Central Bank Independence: An Update of Theory and Evidence," CEPR Discussion Papers 2353, C.E.P.R. Discussion Papers.
    8. Cukierman, A. & Lippi, F., 1998. "Central Bank Independence, Centralization of Wage Bargaining, Inflation and Unemployment - Theory and Some Evidence," Discussion Paper 1998-116, Tilburg University, Center for Economic Research.
    9. Jan-Egbert Sturm & Timo Wollmershäuser, 2008. "The Stress of Having a Single Monetary Policy in Europe," KOF Working papers 08-190, KOF Swiss Economic Institute, ETH Zurich.
    10. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
    11. Calmfors, L., 1998. "Macroeconomic Policy, Wage Setting and Employment -What Differences Does the EMU Make?," Papers 657, Stockholm - International Economic Studies.
    12. Fratianni, Michele & von Hagen, Jürgen & Waller, Christopher, 1993. "Central Banking as a Political Principal-Agent Problem," CEPR Discussion Papers 752, C.E.P.R. Discussion Papers.
    13. Mongelli, Francesco Paolo, 2002. ""New" views on the optimum currency area theory: what is EMU telling us?," Working Paper Series 0138, European Central Bank.
    14. Heinemann, Friedrich & Huefner, Felix P., 2002. "Is the View from the Eurotower Purely European? National Divergence and ECB Interest Rate Policy," ZEW Discussion Papers 02-69, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    15. Waller, Christopher J, 1992. "The Choice of a Conservative Central Banker in a Multisector Economy," American Economic Review, American Economic Association, vol. 82(4), pages 1006-12, September.
    16. Jensen, Henrik, 1993. "Uncertainty in interdependent economies with monopoly unions," Journal of Macroeconomics, Elsevier, vol. 15(1), pages 1-24.
    17. Persson, Torsten & Tabellini, Guido, 1993. "Designing institutions for monetary stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 53-84, December.
    18. 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.
    19. Walsh, Carl E, 1995. "Optimal Contracts for Central Bankers," American Economic Review, American Economic Association, vol. 85(1), pages 150-67, March.
    20. Lohmann, Susanne, 1992. "Optimal Commitment in Monetary Policy: Credibility versus Flexibility," American Economic Review, American Economic Association, vol. 82(1), pages 273-86, March.
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