Monetary-Labor Interactions, International Monetary Regimes, and Central Bank Conservatism

Vincenzo Cuciniello

Working Papers from Center for Fiscal Policy, Swiss Federal Institute of Technology Lausanne

Abstract: 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.

Keywords: Central bank conservatism; non-atomistic wage setting; open-economy macro; monetary regime (search for similar items in EconPapers)
JEL-codes: E42 E58 F33 F41 J5 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2009-02
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:cif:wpaper:200907

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