In an economy with large wage setters (like industry unions), the menetary regime affects the trade-of between consumer real wages and employment and profits faced by the wage setters. This paper shows that an exchange rate target, including participartion in a monetary union, is like to involve...

In an economy with large wage setters (like industry unions), the monetary regime affects the trade-off between consumer real wages and employment and profits faced by the wage setters. This paper shows that an exchange rate target, including participation in a monetary union, is likely to...

Iceland is recovering after a severe crisis, which is an impressive turnaround by any standard. However, the improvement of the economy has led to a rising wage growth, which, if it continues, may lead to another boom-bust cycle. Persistent high wage growth is likely to induce the central bank...