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Hemlock for policy response: Monetary policy, exchange rates and labour unions in SEE and CIS during the crisis


  • Branimir Jovanović
  • Marjan Petreski


The objective of this paper is to assess how the level of unionisation and the rigidity of the exchange rate affects wages and monetary policy in South-East Europe and the Commonwealth of Independent States, with a particular focus on the recent economic crisis. Towards that end, a New Keynesian model with price and wage rigidities is used. Results suggest that fixed exchange rate and strong trade unions seem to constrain monetary policy in these countries, because monetary policy responded counter-cyclically during the crisis only in countries with weak trade unions and countries with flexbible exchange rate. Also, fi ndings point out that trade unions may be more effective for controlling inflation in these countries than the monetary authorities.

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  • Branimir Jovanović & Marjan Petreski, 2012. "Hemlock for policy response: Monetary policy, exchange rates and labour unions in SEE and CIS during the crisis," wiiw Balkan Observatory Working Papers 104, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:bpaper:104

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    References listed on IDEAS

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    Cited by:

    1. Petreski, Marjan, 2013. "Inflation targeting at the crossroads: Evidence from post-communist economies during the crisis," MPRA Paper 47018, University Library of Munich, Germany.

    More about this item


    monetary policy; fixed exchange rate; wages; unionisation; SEE; CIS; crisis;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F0 - International Economics - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General


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