Wage Setting Under Different Monetary Regimes
Steinar Holden ()
No 632, CESifo Working Paper Series from CESifo Group Munich
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)
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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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