Working Paper
Monetary Union and Precautionary Labour-market Reform
Lars Calmfors
CES, Munich, 1998
CES Working Paper No. 174
CES, Munich, 1998
CES Working Paper No. 174
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.
Keywords: Monetary Union, Asymmetric Shocks, Stabilisation Policy, Labour-Market Reform, Equilibrium Unemployment