How Will EMU Affect Inflation and Unemployment in Europe? |
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Authors: | Hans Peter Grüner & Carsten Hefeker |
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Institution: | University of Bonn, D-53113 Bonn, Germany,;University of Basel, CH-4003 Basel, Switzerland |
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Abstract: | This paper explores how European Monetary Union will change the wage setting behavior of national labor unions. We derive the impact of national inflation aversion and labor militancy on the performance of national labor markets under different monetary arrangements. A common central bank raises inflation and unemployment if it acts as conservatively as national central banks. However, unemployment falls in countries that previously tied their monetary policy to the Bundesbank. We also examine the composition of EMU and the influence of national labor market legislation. JEL Classification : E 24; F 02; F 33 |
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Keywords: | European monetary union unemployment labor unions |
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