Relative Wages in Monetary Union and Floating
We analyse a small open economy with a tradable and a sheltered sector. If the unions that operate in each sector coordinate their wage demands sectorwise, the choice of monetary regime - floating cum inflation target vs EMU - may affect the relative wages and prices of the economy. We show that EMU results in lower prices for tradable goods and lower real wages in the traded sector while opposite results hold for sheltered sector prices and wages. Thus, if large unions behave strategically, the choice of monetary regime has far-reaching structural implications.
|Date of creation:||04 Nov 1999|
|Date of revision:|
|Publication status:||Published in Scandinavian Journal of Economics, 2002, pages 277-287.|
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- Rama, Martin, 1994. "Bargaining structure and economic performance in the open economy," European Economic Review, Elsevier, vol. 38(2), pages 403-415, February.
- Steinar Holden, 2002.
"Wage Setting Under Different Monetary Regimes,"
CESifo Working Paper Series
632, CESifo Group Munich.
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