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Holden, Steinar
Year of Publication: 
Series/Report no.: 
CESifo Working Paper 632
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.
wage bargaining
monetary union
inflation target
monetary regime
equilibrium unemployment
Document Type: 
Working Paper

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