Macroeconomic Policy, Wage Setting and Employment: What Difference Does the EMU Make?
1998 (English)Report (Other academic)
The likely impact of the EMU on the variability and level of employment is analysed. The major conclusions are: (1) Although an inflation-target regime will constrain monetary policy of a non-participant in the EMU, it still leaves considerable scope for exchange-rate changes in the case of country-specific demand shocks, provided that there is some nominal price and wage flexibility. (2) Variations in payroll taxes can be used as a substitute for exchange-rate changes in the EMU, but it will be an imperfect substitute. (3) Money-wage flexibility is likely to be larger inside than outside the EMU, but probably not by much. (4) There are various mechanisms through which the EMU may affect incentives for labour-market reform to reduce equilibrium unemployment, but the net impact is highly uncertain.
Place, publisher, year, edition, pages
Stockholm: IIES , 1998. , 55 p.
Seminar Paper / Institute for International Economic Studies, Stockholm University, ISSN 0347-8769 ; 657
Monetary union, Asymmetric shocks, stabilisation policy, wage setting, labour-market reform, equilibrium unemployment
IdentifiersURN: urn:nbn:se:su:diva-41066OAI: oai:DiVA.org:su-41066DiVA: diva2:328105