Will EMU increase eurosclerosis?

Gilles Saint-Paul and Samuel Bentolila

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: In this paper we study the relationship between labor market institutions and monetary policy. We use a simple macroeconomic framework to show how optimal monetary policy rules depend on labor institutions (labor adjustment costs, and nominal and real wage rigitidy) and social preferences regarding inflation, employment, and real wages. We also calibrate our model to compute how the change in social welfare brought about by giving up monetary policy as a result of joining the Economic and Monetary Union (EMU) depends on institutions and preferences. We then use the calibrated model to analyze how EMU affects the incentives for labor market reform, both for reforms that increase the economy's adjustment potential and for those that affect the long-run unemployment rate.

Keywords: EMU; monetary union; labor market institutions; monetary policy; labor market reform; eurosclerosis; political economy; unemployment (search for similar items in EconPapers)
JEL-codes: E31 E32 E42 E52 E58 J30 J50 J60 (search for similar items in EconPapers)
Date: 2000-03
New Economics Papers: this item is included in nep-eec, nep-ifn and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (43)

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Related works:
Working Paper: Will EMU Increase Eurosclerosis? (2000)
Working Paper: Will EMU Increase Eurosclerosis? (2000)
Working Paper: Will EMU Increase Eurosclerosis? (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:449

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