Economic Performance and Stabilization Policy in a Monetary Union with Imperfect Labour and Goods Markets

46 Pages Posted: 17 Apr 2001

See all articles by Fabrizio Coricelli

Fabrizio Coricelli

University of Siena - Department of Political and International Sciences ; Paris School of Economics (PSE); Centre for Economic Policy Research (CEPR)

Alex Cukierman

Tel Aviv University - Eitan Berglas School of Economics; Interdisciplinary Center (IDC) Herzliyah; Centre for Economic Policy Research (CEPR)

Alberto Dalmazzo

University of Siena - Department of Economics

Date Written: March 2001

Abstract

This Paper develops a framework for the analysis of the effects of institutions on economic performance in a monetary union in the presence of stabilization policy, unionized labour markets and monopolistically competitive price setting firms. Nominal wages are fixed contractually. In spite of full price flexibility transmission of monetary policy operates via both aggregate demand and aggregate supply channels. The Paper relates average, as well as country-specific economic performance within the monetary union, broken down to country size, number of unions, the degree of product differentiation on product markets, and central bank conservativeness. Economic performance is characterized by unemployment, inflation, real wages and competitiveness. Both average, as well as country-specific, economic performance in the presence of (possibly) heterogeneous shocks and a unified stabilization policy are evaluated.

Keywords: Central bank conservativeness, monetary union, monopolistic competition, shocks, stabilization, stabilization policy, wage bargaining

JEL Classification: E24, E31, E58

Suggested Citation

Coricelli, Fabrizio and Cukierman, Alex and Dalmazzo, Alberto, Economic Performance and Stabilization Policy in a Monetary Union with Imperfect Labour and Goods Markets (March 2001). CEPR Discussion Paper No. 2745, Available at SSRN: https://ssrn.com/abstract=267102

Fabrizio Coricelli (Contact Author)

University of Siena - Department of Political and International Sciences ( email )

Via Mattioli, 10
Siena, 53100
Italy

Paris School of Economics (PSE)

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Paris, 75014 75014
France

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Alex Cukierman

Tel Aviv University - Eitan Berglas School of Economics ( email )

P.O. Box 39040
Ramat Aviv, Tel Aviv, 69978
Israel
+972 3 540 5360 (Phone)
+972 3 640 9908 (Fax)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

HOME PAGE: http://www.tau.ac.il/~alexcuk/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Alberto Dalmazzo

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy
+39 0577 232 697 (Phone)

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