Unions, wage setting and monetary policy uncertainty

Hans Peter Grüner (), Bernd Hayo () and Carsten Hefeker
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Hans Peter Grüner: University of Mannheim, IZA, Bonn, and CEPR, London. Postal Address: University of Mannheim, Department of Economics, L7, 3-5, D-68131 Mannheim, Germany, http://www2.vwl.uni-mannheim.de/index.php?id=10&L=1

No 490, Working Paper Series from European Central Bank

Abstract: Recent theoretical research has studied extensively the link between wage setting and monetary policymaking in unionized economies. This paper addresses the question of the role of monetary uncertainty from both an empirical and theoretical point of view. Our analysis is based on a simple model that derives the influence of monetary uncertainty on unionized wage setting. We construct an indicator of monetary policy uncertainty and test our model with data for the G5 countries. The central finding is that monetary policy uncertainty has a negative impact on nominal wage growth in countries where wage setting is relatively centralized. This result is consistent with recent theoretical approaches to central bank transparency and wage setting.

Keywords: Monetary policy uncertainty; centralized wage setting; union behavior. (search for similar items in EconPapers)
JEL-codes: E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ltv, nep-mac and nep-mon
Date: 2005-06
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