Efficient Bargains and Currency Devaluation.

This paper proposes a new route, namely efficient bargains between the union and the firm over wage and employment, to shed light on the contractionary effects of a currency devaluation. It is found that a currency devaluation will definitely depress the supply of domestic goods when the union and the firm negotiate an efficient wage-employment contract. Thus the authors' result can be regarded as a theoretical vehicle for explaining the empirical findings of the contractionary devaluation. Copyright 1996 by The Economic Society of Australia.