IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Labour Market Reform and Monetary Policy in EMU: Do Asymmetries Matter?

  • Hughes Hallett, Andrew
  • Viegi, Nicola

This Paper analyses the interaction between a common monetary policy and differentiated labour market institutions. We develop a model of a two country monetary union. In each country, labour market institutions are distinguished by the degree of centralization in wage bargaining. In each country the government can also use an instrument (general taxation or payroll taxes) to influence their overall labour costs. Finally a common monetary policy is followed in a ‘conservative’ manner, as defined by Rogoff (1985). The results show that structural and preference asymmetries matter, both in the determination of economic policy and in performance. In particular centralized labour market institutions confer a certain comparative advantage in policy making which provides a natural incentive for the less flexible (or less reformed) to want to join a currency union; and for the more flexible to stay outside. This lowers the incentives for reform inside the union, as Calmfors and others have conjectured.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=2979
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2979.

as
in new window

Length:
Date of creation: Sep 2001
Handle: RePEc:cpr:ceprdp:2979
Contact details of provider: Postal:
Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.

Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


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.:

as in new window
  1. Jeffrey C. Fuhrer, 1994. "Goals, guidelines, and constraints facing monetary policymakers: an overview," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 3-15.
  2. Alan S. Blinder, 1999. "Central Bank Credibility: Why Do We Care? How Do We Build It?," NBER Working Papers 7161, National Bureau of Economic Research, Inc.
  3. Torben M. Andersen & Niels Haldrup & Jan Rose Sørensen, 2000. "Labour market implications of EU product market integration," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 105-134, 04.
  4. Frankel, Jeffrey A & Rose, Andrew K, 1998. "The Endogeneity of the Optimum Currency Area Criteria," Economic Journal, Royal Economic Society, vol. 108(449), pages 1009-25, July.
  5. Tirole, J., 1993. "The Internal Organization of Government," Working papers 93-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
  7. Demertzis, Maria & Hughes Hallett, Andrew & Viegi, Nicola, 2004. "An independent central bank faced with elected governments," European Journal of Political Economy, Elsevier, vol. 20(4), pages 907-922, November.
  8. Alan B. Krueger, 2000. "From Bismarck to Maastricht: The March to European Union and the Labor Compact," NBER Working Papers 7456, National Bureau of Economic Research, Inc.
  9. Cukierman, A. & Lippi, F., 1999. "Labor markets and Monetary Union : A Strategic Analysis," Discussion Paper 1999-100, Tilburg University, Center for Economic Research.
  10. Lawrence F. Katz & Olivier Blanchard, 1999. "Wage Dynamics: Reconciling Theory and Evidence," American Economic Review, American Economic Association, vol. 89(2), pages 69-74, May.
  11. Canzoneri, Matthew B & Cumby, Robert & Diba, Behzad, 1998. "Is the Price Level Determined by the Needs of Fiscal Solvency?," CEPR Discussion Papers 1772, C.E.P.R. Discussion Papers.
  12. Jensen, Henrik, 2001. "Optimal Degrees of Transparency in Monetary Policymaking," CEPR Discussion Papers 2689, C.E.P.R. Discussion Papers.
  13. 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.
  14. Agell, J., 1998. "On the Benefits from Rigid Labour Markets: Norms, Market Failures, and Social Insurance," Papers 1998:17, Uppsala - Working Paper Series.
  15. Soskice, David & Iversen, Torben, 1998. "Multiple Wage-Bargaining Systems in the Single European Currency Area," Oxford Review of Economic Policy, Oxford University Press, vol. 14(3), pages 110-124, Autumn.
  16. Sibert, Anne, 1999. "Monetary Integration and Economic Reform," Economic Journal, Royal Economic Society, vol. 109(452), pages 78-92, January.
  17. Svensson, Lars E O, 1995. "Optimal Inflation Targets, 'Conservative' Central Banks, and Linear Inflation Contracts," CEPR Discussion Papers 1249, C.E.P.R. Discussion Papers.
  18. Julio J. Rotemberg & Michael Woodford, 1998. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy: Expanded Version," NBER Technical Working Papers 0233, National Bureau of Economic Research, Inc.
  19. Alesina, Alberto & Gatti, Roberta, 1995. "Independent Central Banks: Low Inflation at No Cost?," American Economic Review, American Economic Association, vol. 85(2), pages 196-200, May.
  20. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Working Papers in Applied Economic Theory 94-05, Federal Reserve Bank of San Francisco.
  21. Calmfors, Lars, 1998. "Macroeconomic Policy, Wage Setting and Employment - What Difference Does the EMU Make?," Seminar Papers 657, Stockholm University, Institute for International Economic Studies.
  22. Juan F. Jimeno & Jose Vinals, 1998. "The impact of EMU on European unemployment," Working Papers 34, Oesterreichische Nationalbank (Austrian Central Bank).
  23. Sibert, Anne & Sutherland, Alan, 1997. "Monetary Regimes and Labour Market Reform," CEPR Discussion Papers 1731, C.E.P.R. Discussion Papers.
  24. Danthine, Jean-Pierre & Hunt, Jennifer, 1992. "Wage Bargaining Structure, Employment and Economic Integration," CEPR Discussion Papers 694, C.E.P.R. Discussion Papers.
  25. 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.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:2979. 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: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.