Monetary-Labor Interactions, International Monetary Regimes, and Central Bank Conservatism
A two-country general equilibrium model with large wage setters and conservative monetary authorities is employed to investigate the welfare implications of three international monetary regimes: i) non-cooperative, ii) cooperative, and iii) monetary union. The analysis shows that the unions’ wage claims depend on three strategic effects which are substantially different between the international policy arrangements. In contrast with recent studies, a switch from non-cooperation to monetary union is welfare improving with a sufficiently conservative central bank because unions perceive wage hikes as delivering lower terms-of-trade gains; while a switch from non-cooperation to cooperation is always beneficial because wage hikes do not yield any terms-of-trade gain. Finally, the paper qualifies Lippi’s (2003) findings.
|Date of creation:||Feb 2009|
|Date of revision:|
|Contact details of provider:|| Postal: EPFL - CDM - SFI - CFI, Odyssea, Station 5, CH-1015 Lausanne|
Phone: +41 21 693 00 77
Fax: +41 21 693 00 60
Web page: http://cfi.epfl.ch/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cif:wpaper:200907. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Corinne Dubois)
If references are entirely missing, you can add them using this form.