Nominal Wage Flexibility and Monetary Union

Jules Leichter ()
Additional contact information
Jules Leichter: U.S. Department of the Treasury, Postal: U.S. Department of the Treasury, 1500 Pennsylvania, Avenue NW, Washington DC 20220, USA

Journal of Economic Integration, 2004, vol. 19, 113-130

Abstract:

The impact of the creation of a monetary union on structural convergence among member countries remains an open question. A model of monetary union is presented in which national nominal wage flexibility is endogenous and may vary across countries. We use wage indexation as a proxy for nominal wage flexibility and show how the strategic interaction between the monetary union central bank and wage bargainers results in “outlier” countries choosing an optimal wage contract which creates a more flexible nominal wage. The model predicts that if national business cycles are not perfectly synchronized, the optimal response of labor market participants to the creation of a single currency may promote structural divergence among member countries.

Keywords: Monetary union; Wage flexibility; Structural convergence (search for similar items in EconPapers)
JEL-codes: E50 F33 J50 (search for similar items in EconPapers)
Date: 2004
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:integr:0268

Access Statistics for this article

Journal of Economic Integration is currently edited by Seongeun Kim

More articles in Journal of Economic Integration from Center for Economic Integration, Sejong University Contact information at EDIRC.
Bibliographic data for series maintained by Yunhoe Kim ().