Monetary Union and Labour Market Reform

Anne Sibert, Alan Sutherland

    Research output: Contribution to journalArticlepeer-review

    55 Citations (Scopus)

    Abstract

    Policy makers' incentives to undertake costly labor market reform depend on the international monetary system. A regime of noncooperative monetary policy is compared with monetary union, We find that noncooperative policy leads to more reform of factors that affect the inflation bias. Which regime leads to more reform of factors affecting labor marker flexibility depends on the size of monetary policy spillovers and the degree of correlation of supply shocks. We show that monetary union produces higher expected inflation, but a lower variance of inflation. Welfare can be higher or lower with monetary union. (C) 2000 Elsevier Science B.V. All rights reserved.

    Original languageEnglish
    Pages (from-to)421-435
    Number of pages15
    JournalJournal of International Economics
    Volume51
    Publication statusPublished - Aug 2000

    Keywords

    • monetary union
    • economic reform

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