Abstract
Building on a micro-founded model of a two-region monetary union, this paper analyses the macroeconomic impact of institutional reforms in labour markets and central banking that may occur as a result of monetary unification. The paper shows that monopoly distortions in the labour market are a key factor in evaluating the effects of central bank’s conservativeness and wage centralisation on inflation and unemployment. Wage restraint is favoured in a highly decentralised wage bargaining setup as well as under a liberal central bank, provided competition is high in the labour market.
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Cavallari, L. (2003). Strategic Wage Setting in a Monetary Union. In: Franzese, R., Mooslechner, P., Schürz, M. (eds) Institutional Conflicts and Complementarities. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-4062-2_6
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DOI: https://doi.org/10.1007/978-1-4757-4062-2_6
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