Wage Setting Under Different Monetary Regimes

Steinar Holden

No 632, CESifo Working Paper Series from CESifo

Abstract: In an economy with large wage setters (like industry unions), the monetary regime affects the trade-off between consumer real wages and employment and profits faced by the wage setters. This paper shows that an exchange rate target, including participation in a monetary union, is likely to involve lower wages in the traded sector, and higher wages in the non-traded sector, than does a price target. An exchange rate target also involves higher prices on non-traded goods relative to traded goods. Overall welfare is likely to be higher under a price target.

Keywords: wage bargaining; monetary union; inflation target; monetary regime; equilibrium unemployment (search for similar items in EconPapers)
Date: 2002
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Related works:
Working Paper: Wage setting under different monetary regimes (1999)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_632

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