
Labour Market Reform and the Effectiveness of Monetary Policy in EMU
Labour Market Reform and the Effectiveness of Monetary Policy in EMU
- Andrew Hughes Hallett Nicola Viegi
- 세종대학교 경제통합연구소
- Journal of Economic Integration
- 제18권 제4호
- 등재여부 : KCI등재
- 2003.12
- 726 - 749 (24 pages)
This paper analyses the interaction between a common monetary policy and differentiated labour market institutions. We develop a model of a two country monetary union. In each country, labour markets are distinguished by the degree of centralisation in wage bargaining. In each country the government can also use an instrument (general taxation or payroll taxes) to influence their overall labour costs. Finally a common monetary policy is followed in a conservative manner, as defined by Rogoff (1985). The results show structural and preference asymmetries matter, both in the determination of economic policy and in performance. In particular, centralised labour market institutions confer a certain comparative advantage in policy making which provides a natural incentive for the less flexible (or less reformed) to want to join a currency union; and also for the more flexible to stay outside. This lowers the incentives for reform inside the union, as Calmfors and others have conjectured.
Ⅰ. Introduction
Ⅱ. The Model
Ⅲ. Regime One: Non Cooperation with Decentralised Labour Markets
Ⅳ. Regime 2: Non Cooperation with Two Centralised Unions
Ⅴ. Regime 3: Asymmetries in Labour Market Institutions or Practices - a parable of flexible vs. inflexible labour markets
Ⅵ. Conclusions