Template-Type: ReDIF-Paper 1.0
Author-Name: Vincenzo Cuciniello 
Author-X-Name-First: Vincenzo
Author-X-Name-Last: Cuciniello
Author-Email: vincenzo.cuciniello@epfl.ch
Author-Workplace-Name: Chair of International Finance, Ecole Polytechnique Federale de Lausanne (EPFL), Switzerland
Title: Macroeconomic interdependence under collective wage bargaining
Abstract: This paper uses a two-country, sticky-price model with non-atomistic wage setters to study the role of collective wage bargaining in the propagation of monetary shocks. I find that the welfare transmissions of a monetary expansion are reinforced by different labor market structures. Non-atomistic domestic unions anticipate that their wage demands raise real labor income through a movement of the terms of trade. This leads to an additional channel of transmission of monetary policy that goes through aggregate supply. Yet, workers benefit more from a monetary expansion when the exchange rate pass-through is not limited and the elasticity of substitution across traded goods is sizable. It follows that wage mark-ups charged by unions endogenously vary with those structural parameters. In particular, labor and product market distortions are strategic substitute in affecting the perceived labor demand elasticity.
Length: 28 pages		
Creation-Date: 2009-07
Revision-Date:
Publication-Status: 
File-URL: http://infoscience.epfl.ch/record/141372/files/CFP2009_06_1.pdf
Number:
Classification-JEL: F41, F42, J5
Keywords: non-atomistic agents, interdependence, exchange rate fluctuation, wage setting
Handle: RePEc:cif:wpaper:200906