Exchange Rate Regime and Wage Determination in Central and Eastern Europe

30 Pages Posted: 24 Nov 2008

See all articles by Gunther Schnabl

Gunther Schnabl

University of Leipzig - Institute for Economic Policy

Christina Ziegler

University of Leipzig; CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute

Date Written: November 2008

Abstract

After the eastern enlargement of the European Union due to increasing labor market integration, wage determination and monetary integration in Central and Eastern Europe have become key issues in European economic policy making. Based on the Scandinavian model of wage adjustment by Lindbeck (1979), we intend to analyze the role of exchange rates in the wage determination process of the Central and Eastern European countries to identify which exchange rate strategy contributes to faster wage convergence in Europe. Panel estimations reveal a robust negative relationship between exchange rates and wage growth. This suggests that workers in countries with fixed exchange rates are likely to benefit from higher wage increases.

Keywords: wage policy, labor markets, exchange rate regime, Central and Eastern Europe

JEL Classification: C23, J30, F31, O52

Suggested Citation

Schnabl, Gunther and Ziegler, Christina and Ziegler, Christina, Exchange Rate Regime and Wage Determination in Central and Eastern Europe (November 2008). CESifo Working Paper Series No. 2471, Available at SSRN: https://ssrn.com/abstract=1306269 or http://dx.doi.org/10.2139/ssrn.1306269

Gunther Schnabl (Contact Author)

University of Leipzig - Institute for Economic Policy ( email )

Institute for Economic Policy
Grimmaische Straße 12
Leipzig, 04109
Germany

HOME PAGE: http://www.wifa.uni-leipzig.de/iwp/

Christina Ziegler

CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute ( email )

Poschinger Str. 5
Munich, 01069
Germany

University of Leipzig ( email )

Marschnerstrasse 31
D-04109 Leipzig, 04109
Germany

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