Hemlock for policy response: Monetary policy, exchange rates and labour unions in SEE and CIS during the crisis

Branimir Jovanovic and Marjan Petreski (marjan.petreski@uacs.edu.mk)

No 104, wiiw Balkan Observatory Working Papers from The Vienna Institute for International Economic Studies, wiiw

Abstract: The objective of this paper is to assess how the level of unionisation and the rigidity of the exchange rate affects wages and monetary policy in South-East Europe and the Commonwealth of Independent States, with a particular focus on the recent economic crisis. Towards that end, a New Keynesian model with price and wage rigidities is used. Results suggest that fixed exchange rate and strong trade unions seem to constrain monetary policy in these countries, because monetary policy responded counter-cyclically during the crisis only in countries with weak trade unions and countries with flexible exchange rate. Also, findings point out that trade unions may be more effective for controlling inflation in these countries than the monetary authorities.

Keywords: monetary policy; fixed exchange rate; wages; unionisation; SEE; CIS; crisis (search for similar items in EconPapers)
JEL-codes: E52 F0 J51 P20 (search for similar items in EconPapers)
Date: 2012-12
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Citations: View citations in EconPapers (1)

Published as wiiw Balkan Observatory Working Paper

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