Business Intelligence

Has The EMU Reduced Wage Growth And Unemployment? Testing A Model Of Trade Union Behaviour

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Executive Summary

By using a model of trade union behaviour Gr?ner (2010) argues that the introduction of the European Monetary Union (EMU) led to lower wage growth and lower unemployment in participating countries. Following Gr?ner's model, monetary centralization lets the central bank react less flexibly to national business cycle movements. This increases the amplitude of national business cycles which, in turn, leads to higher unemployment risk. In order to counter-balance this effect, trade unions lower their claims for wage mark-ups resulting in lower wage growth and lower unemployment.

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