Nominal Wage Flexibility, Wage Indexation and Monetary Union

Arbeitspapier

Membership in a monetary union implies stronger incentives for nominal wage flexibility in the form of wage indexation and shorter contract length than nonmembership. For example, entry into a monetary union may cause a move from a non-indexation to an indexation equilibrium. But more wage flexibility is only an imperfect substitute for an own monetary policy. It is possible that an increase in wage flexibility is welfare-decreasing because of the accompanying rise in price variability. The interaction between wage setting and central bank behaviour may result in either multiple equilibria or a unique full-indexation equilibrium.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 761

Classification and Topics

• Classification: Wirtschaft
• Subject: nominal wage flexibility ; wage indexation ; monetary union ; asymmetric shocks

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Calmfors, Lars ; Johansson, Åsa
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/76067
• Last update: 10.03.2025, 11:42 AM CET