Working Paper: CEPR ID: DP1731
Authors: Anne C. Sibert; Alan Sutherland
Abstract: Policy-makers? incentives to undertake costly reform depends on the international monetary system. We consider the effect of monetary regimes on labour market reform. We find international negotiation of monetary policy produces less reform than non-cooperation. Reform is lowest of all with monetary union. Because integration lowers reform, inflation is higher under monetary union than with national currencies. It may be higher or lower with negotiation than no coordination. Despite the negative impact on reform, negotiation produces higher welfare than no coordination. Monetary union can produce higher or lower welfare than either negotiation or no coordination.
Keywords: policy coordination; economic reform; monetary union
JEL Codes: E61; F33; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| international monetary negotiations (F33) | less labor market reform (J48) |
| monetary union (F36) | lowest levels of labor market reform (E69) |
| monetary regime (E42) | extent of labor market reform (J48) |
| inflation under monetary union (F45) | relationship with labor market reform (J48) |