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Exchange Rate Regime and Wage Determination in Central and Eastern Europe

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  • Gunther Schnabl
  • Christina Ziegler

Abstract

After the eastern enlargement of the European Union due to increasing labor market integration, wage determination and monetary integration in Central and Eastern Europe have become key issues in European economic policy making. Based on the Scandinavian model of wage adjustment by Lindbeck (1979), we intend to analyze the role of exchange rates in the wage determination process of the Central and Eastern European countries to identify which exchange rate strategy contributes to faster wage convergence in Europe. Panel estimations reveal a robust negative relationship between exchange rates and wage growth. This suggests that workers in countries with fixed exchange rates are likely to benefit from higher wage increases.

Suggested Citation

  • Gunther Schnabl & Christina Ziegler, 2008. "Exchange Rate Regime and Wage Determination in Central and Eastern Europe," CESifo Working Paper Series 2471, CESifo.
    • Handle: RePEc:ces:ceswps:_2471
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    Cited by:

    1. Andreas Hoffmann, 2010. "An Overinvestment Cycle In Central And Eastern Europe?," Metroeconomica, Wiley Blackwell, vol. 61(4), pages 711-734, November.
    2. Ziegler, Christina, 2012. "Monetary policy under alternative exchange rate regimes in Central and Eastern Europe," Working Papers 104, University of Leipzig, Faculty of Economics and Management Science.

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    More about this item

    Keywords

    wage policy; labor markets; exchange rate regime; Central and Eastern Europe;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

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