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Future EMU Membership and Wage Flexibility in Selected EU Candidate Countries


  • Artur Radziwill
  • Mateusz Walewski


This paper attempts to evaluate wage rigidity related to risks of increased size and volatility of unemployment after the candidate countries enter the EMU. Such evaluation is done through the study of past labour market adjustment mechanisms and, in particular, the role played by the exchange rate movements and independent monetary policy. The paper examines some institutional and structural characteristics of candidate countries labour markets that could influence the wage elasticity. The analysis indicates that generally nominal wages are not flexible in candidate countries. Inflationary surprises and nominal exchange rate movements have an effect on the adjustment, especially during the Russian crisis. On the other hand fast productivity growth creates the environment in which unit labour can adjust to unfavourable labour market outcomes through moderation of real wage dynamics despite nominal stickiness. The paper indicates possible fields of further in-depth research in this area.

Suggested Citation

  • Artur Radziwill & Mateusz Walewski, 2003. "Future EMU Membership and Wage Flexibility in Selected EU Candidate Countries," CASE Network Studies and Analyses 0265, CASE-Center for Social and Economic Research.
  • Handle: RePEc:sec:cnstan:0265

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    References listed on IDEAS

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    6. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
    7. Juan F. Jimeno & Jose Vinals, 1998. "The impact of EMU on European unemployment," Working Papers 34, Oesterreichische Nationalbank (Austrian Central Bank).
    8. Fidrmuc, Jan, 2004. "Migration and regional adjustment to asymmetric shocks in transition economies," Journal of Comparative Economics, Elsevier, vol. 32(2), pages 230-247, June.
    9. Anne C. Sibert & Alan Sutherland, "undated". "Monetary Regimes and Labour Market Reform," Discussion Papers 97/14, Department of Economics, University of York.
    10. Bayoumi, T. & Eichengreen, B., 1994. "One Money or Many? Analysing the Prospects for Monetary Unification in Various Parts of the World," Princeton Studies in International Economics 76, International Economics Section, Departement of Economics Princeton University,.
    11. Christiane Krieger-Boden & Dirk Dohse & Rüdiger Soltwedel, 1999. "EMU Challenges European Labor Markets," IMF Working Papers 99/131, International Monetary Fund.
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    13. Gordon, Robert J, 1996. "Macroeconomic Policy in the Presence of Structural Maladjustment," CEPR Discussion Papers 1493, C.E.P.R. Discussion Papers.
    14. Perotti, Roberto & Alesina, Alberto, 1997. "The Welfare State and Competitiveness," Scholarly Articles 4553027, Harvard University Department of Economics.
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    Cited by:

    1. Marek Gora & Artur Radziwill & Agnieszka Sowa & Mateusz Walewski, 2006. "Tax Wedge and Skills: Case of Poland in International Perspective," CASE Network Reports 0064, CASE-Center for Social and Economic Research.
    2. Ian Babetskii, 2006. "Aggregate Wage Flexibility in Selected New EU Member States," Working Papers 2006/1, Czech National Bank, Research Department.
    3. Van Poeck Andrè & Veiner Maret & Plasmans Joseph, 2007. "Wage flexibility in the new European Union members: How different form the “old” members?," wp.comunite 0006, Department of Communication, University of Teramo.


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