Munich Personal RePEc Archive

Unions’ Coordination and the Central Banker’s behavior in a Monetary Union

Borda, Patrie and Gaumont, Damien and Manioc, Olivier (2011): Unions’ Coordination and the Central Banker’s behavior in a Monetary Union.

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Abstract

In a 2-country monetary union, this paper studies a Stackelberg game be- tween the Central Banker and two symmetrical countries. The central banker chooses the money supply. In each country, there is a union who acts as a monopoly of labor supply. Firms are wage and price takers. We analyze the effects of internationally coordinated unions versus internationally uncoor-dinated unions. It is shown that wages are lower when unions are interna- tionally coordinated and the money policy is more accomodating. This result is linked to the degree of conservatism of the Central Banker with respect to inflation.1

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