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How Will EMU Affect Inflation and Unemployment in Europe?
Author(s) -
Grüner Hans Peter,
Hefeker Carsten
Publication year - 1999
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00139
Subject(s) - economics , unemployment , inflation (cosmology) , monetary policy , wage , employment protection legislation , central bank , affect (linguistics) , inflation targeting , legislation , monetary economics , labour economics , macroeconomics , political science , linguistics , philosophy , physics , theoretical physics , law
This paper explores how European Monetary Union will change the wage setting behavior of national labor unions. We derive the impact of national inflation aversion and labor militancy on the performance of national labor markets under different monetary arrangements. A common central bank raises inflation and unemployment if it acts as conservatively as national central banks. However, unemployment falls in countries that previously tied their monetary policy to the Bundesbank. We also examine the composition of EMU and the influence of national labor market legislation. JEL Classification : E 24; F 02; F 33