Citation

Discussion Paper Details

Please find the details for DP2236 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Labour Markets and Monetary Union: A Strategic Analysis

Author(s): Alex Cukierman and Francesco Lippi

Publication Date: September 1999

Keyword(s): Inflation, Labour Unions, Monetary Union, Strategic Monetary Policy and Unemployment

Programme Area(s): International Macroeconomics and Labour Economics

Abstract: This paper analyzes the macroeconomic consequences of the establishment of a monetary union in the presence of unionized labour markets. It is shown that the effects of the formation of a monetary union depend on several labour market features, such as the degree of centralization of wage bargaining, labour unions' inflation aversion and the degree of substitutability between the labour of different unions. In particular, the switch from national monetary policies to a unified monetary policy usually affects both inflation and unemployment, even when all structural parameters of the economy and of unions' and policy makers' preferences remain the same. The benchmark case of a monetary union between identical countries suggests that the switch to a monetary union is likely to make labor uur unions more aggressive, increasing unemployment. Qualifications to this result are provided and their robustness is investigated under alternative structural assumptions, like cross-country asymmetries, (pre-union) ERM membership and wage leadership.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2236

Bibliographic Reference

Cukierman, A and Lippi, F. 1999. 'Labour Markets and Monetary Union: A Strategic Analysis'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2236