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Monetary Union and Precautionary Labour-market Reform

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  • Lars Calmfors

Abstract

The paper demonstrates that policy makers may have a precautionary motive to undertake more labour-market reform - and hence attain lower equilibrium unemployment - inside a monetary union than outside. The reason is a desire to reduce the utility cost of variations in employment when asymmetric shocks can no longer be stabilised through domestic monetary policy.

Suggested Citation

  • Lars Calmfors, 1998. "Monetary Union and Precautionary Labour-market Reform," CESifo Working Paper Series 174, CESifo.
    • Handle: RePEc:ces:ceswps:_174
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    References listed on IDEAS

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    1. Layard, R. & Nickell, S., 1991. "Unemployment in the OECD Countries," Economics Series Working Papers 99130, University of Oxford, Department of Economics.
    2. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    3. Hayne E. Leland, 1968. "Saving and Uncertainty: The Precautionary Demand for Saving," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 82(3), pages 465-473.
    4. Albert Ma, Ching-to & Weiss, Andrew M., 1993. "A signaling theory of unemployment," European Economic Review, Elsevier, vol. 37(1), pages 135-157, January.
    5. Nickell, S., 1991. "Wages, Unemployment and Population Change," Economics Series Working Papers 99122, University of Oxford, Department of Economics.
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    Cited by:

    1. Obstfeld, Maurice, 1998. "EMU: Ready, or Not?," Center for International and Development Economics Research, Working Paper Series qt8qn3v8j3, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
    2. Alan B. Krueger, 1999. "From Bismarck to Maastricht: The March to European Union and the Labor Compact," Working Papers 803, Princeton University, Department of Economics, Industrial Relations Section..
    3. Hans-Werner Sinn, 1999. "Inflation and Welfare: Comment on Robert Lucas," NBER Working Papers 6979, National Bureau of Economic Research, Inc.
    4. Dobrescu, Emilian, 2006. "Double-Conditioned Potential Output," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 3(1), pages 32-50, March.
    5. Görgens Egon, 2002. "Europäische Geldpolitik: Gefährdungspotentiale - Handlungsmöglichkeiten - Glaubwürdigkeit," ORDO. Jahrbuch für die Ordnung von Wirtschaft und Gesellschaft, De Gruyter, vol. 53(1), pages 31-58, January.
    6. Grüner, Hans Peter, 2002. "Should central banks really be flexible?," Working Paper Series 188, European Central Bank.

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