The Interaction of Monetary Policy and Wage Bargaining in the EMU Lessons from the Endogenous Money Approach

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ISBN: 9781403941510 | 1403941513
Cover: Hardcover
Copyright: 1/15/2005

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Sebastian Dullien gives a novel explanation for unemployment and inflation in the Euro-Zone. He argues that unemployment stems from a lack of cooperation between unions and monetary authorities: In an economy with endogenous money as EMU, wage setters are responsible for price stability while the central bank is responsible for the level of output. Cooperation between both actors is necessary for high employment and low inflation. The current institutional set-up is found to be unable to assure cooperation.

List of Figures

List of Tables

Acknowledgements

xiii

1 Introduction: The Unsolved Unemployment-Inflation Puzzle

(10)

1.1 The macroeconomic consensus after the end of the Keynesian revolution

(2)

1.2 Empirical experience: challenging the consensus

(2)

1.3 Interaction between monetary policy and wage bargaining

(5)

2 Bargaining Structures and the Central Bank: Literature and Empirics

(37)

2.1 Early literature on bargaining structures

(3)

2.2 Monetary policy externality

(7)

2.3 European empirics: does the theory fit?

(25)

Appendix 2.1: GDP Growth and Component Accounting

(2)

3 The Real Balance Effect: Shortcomings

(28)

3.1 The real balance effect revisited

(2)

3.2 Money: net wealth?

(17)

3.3 Exogenous money supply?

(8)

4 Monetary Policy Transmission in a World of Endogenous Money

(21)

4.1 The instrument: the short-term interest rate

(9)

4.2 Investment and the interest rate

(3)

4.3 Consumption and the interest rate

(4)

4.4 Notes on the exchange rate channel

(2)

4.5 Transmission in the euro-zone: empirical evidence

(2)

5 Output and Prices in a World Without the Real Balance Effect

(52)

5.1 Equilibrium in a baseline model

(11)

5.2 The labour market and wage dynamics

109

(14)

5.3 The central bank

123

(13)

Appendix 5.1: The Basic Setup

136

(3)

Appendix 5.2: A Small Union vis-à-vis a Large Union

139

(7)

Appendix 5.3: Disequilibrium Dynamics

146

(3)

6 The Central Bank: Restrictions in a World of Endogenous Money

149

(45)

6.1 Financing investment by money creation

150

(3)

6.2 The microeconomics of endogenous money

153

(8)

6.3 A macroeconomic profile of endogenous money

161

(17)

Appendix 6.1: Microeconomic Portfolio Theory

178

(6)

Appendix 6.2: Aggregate Portfolio Mathematics

184

(4)

Appendix 6.3: Graphical Representation

188

(3)

Appendix 6.4: Inside Money, Tobin's Monetised Capital and Public Debt

191

(3)

7 The Optimal Policy Mix and Logic of a Social Pact

194

(34)

7.1 The optimal policy mix in EMU

195

(9)

7.2 EMU: coordination failure or cooperation failure?

204

(16)

7.3 A social pact as a possible remedy

220

(8)

8 Conclusions and Outlook

228

(4)

Appendices: Monetary and Wage Policy in Standard Models

232

(8)

Appendix A.1 The transmission of monetary policy

232

(5)

Appendix A.2 The money stock as an automatic stabiliser

237

(1)

Appendix A.3 The role of wage policy

237

(3)

Notes and References

240

(18)

Bibliography

258

(12)

Index

270

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The Interaction of Monetary Policy and Wage Bargaining in the EMU Lessons from the Endogenous Money Approach

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