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Unions, Wage Setting and Monetary Policy Uncertainty
H. P. Gruner University of Mannheim - Department of Economics; Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR) Bernd Hayo University of Marburg - Faculty of Economics and Business Administration Carsten Hefeker HWWA Institute of International Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) June 2005 ECB Working Paper No. 490 Abstract: Recent theoretical research has studied extensively the link between wage setting and monetary policymaking in unionized economies. This paper addresses the question of the role of monetary uncertainty from both an empirical and theoretical point of view. Our analysis is based on a simple model that derives the influence of monetary uncertainty on unionized wage setting. We construct an indicator of monetary policy uncertainty and test our model with data for the G5 countries. The central finding is that monetary policy uncertainty has a negative impact on nominal wage growth in countries where wage setting is relatively centralized. This result is consistent with recent theoretical approaches to central bank transparency and wage setting.
Keywords: Monetary policy uncertainty, centralized wage setting, union behavior JEL Classifications: E58 Working Paper SeriesDate posted: June 02, 2005 ; Last revised: June 02, 2005Suggested CitationContact Information
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