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Efficient Bargains and Currency Devaluation *
Author(s) -
LAI CHINGCHONG,
CHANG JUINJEN,
CHANG WENYA
Publication year - 1996
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1996.tb00965.x
Subject(s) - devaluation , negotiation , currency , economics , currency union , wage , monetary economics , international economics , labour economics , political science , law
This paper proposes a new route, namely efficient bargains between the union and the firm over wage and employment, to shed light on the contractionary effects of a currency devaluation. It is found that a currency devaluation will definitely depress the supply of domestic goods when the union and the firm negotiate an efficient wage‐employment contract. Thus our result can be regarded as a theoretical vehicle for explaining the empirical findings of the contractionary devaluation.