Inflationary performance in a monetary union with large wage setters

Lilia Cavallari

No B 11-2001, ZEI Working Papers from University of Bonn, ZEI - Center for European Integration Studies

Abstract: Building on a micro-founded model of a two region-world economy in the tradition of the new open economy literature, this paper analyses the strategic interaction of large wage-setters and the central bank when switching from a regime of uncoordinated national monetary policies to a monetary union. The establishment of a monetary union is shown to favour wage restraint, provided the uni…ed central bank is not too conservative. Wage discipline may reduce equilibrium in‡ation in a monetary union relative to the one under uncoordinated national monetary policies when wage setting is centralised across member countries.

Keywords: monetary union; wage bargaining; inflationary bias (search for similar items in EconPapers)
JEL-codes: E5 F4 (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zeiwps:b112001

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