Macroeconomic Policy, Wage Setting and Employment : What Difference Does the EMU Make?

• The likely impact of the EMU on the variability and level of employment is analysed. The major conclusions are: (1) Although an inflation-target regime will constrain monetary policy of a non-participant in the EMU, it still leaves considerable scope for exchange-rate changes in the case of country-specific demand shocks, provided that there is some nominal price and wage flexibility. (2) Variations in payroll taxes can be used as a substitute for exchange-rate changes in the EMU, but it will be an imperfect substitute. (3) Money-wage flexibility is likely to be larger inside than outside the EMU, but probably not by much. (4) There are various mechanisms through which the EMU may affect incentives for labour-market reform to reduce equilibrium unemployment, but the net impact is highly uncertain.

Ämnesord

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Nyckelord

Monetary union

Asymmetric shocks

stabilisation policy

wage setting

labour-market reform

equilibrium unemployment

Economics

Nationalekonomi

Publikations- och innehållstyp

vet (ämneskategori)

rap (ämneskategori)