Wage Setting Under Different Monetary Regimes

27 Pages Posted: 24 Feb 2001

See all articles by Steinar Holden

Steinar Holden

University of Oslo - Department of Economics; Norges Bank; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: January 2002

Abstract

In an economy with large wage setters (like industry unions), the monetary regime affects the trade-off between consumer real wages and employment and profits faced by the wage setters. This paper shows that an exchange rate target, including participation in a monetary union, is likely to involve lower wages in the traded sector, and higher wages in the non-traded sector, than does a price target. An exchange rate target also involves higher prices on non-traded goods relative to traded goods. Overall welfare is likely to be higher under a price target.

Keywords: Wage Bargaining, Monetary Union, Inflation Target, Monetary Regime, Equilibrium Unemployment

JEL Classification: E5, J5

Suggested Citation

Holden, Steinar, Wage Setting Under Different Monetary Regimes (January 2002). Available at SSRN: https://ssrn.com/abstract=218029 or http://dx.doi.org/10.2139/ssrn.218029

Steinar Holden (Contact Author)

University of Oslo - Department of Economics ( email )

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HOME PAGE: http://folk.uio.no/~sholden/

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CESifo (Center for Economic Studies and Ifo Institute)

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