In most European countries, the prevailing terms of employment, including the nominal wage, can only be changed by mutual consent. I show that this feature implies that workers have a strategic advantage in the wage negotiations when they try to prevent a cut in nominal wages. If inflation is so...

This paper lays out a simple open economy macromodel based on the recent literature on imperfect competition and equilibrium unemployment. It is shown that the NAIRU is not a clearcut concept in the open economy framework. Furthermore, it is argued that the self-correcting mechanisms in the...

In most European countries, the prevailing terms of employment, including the nominal wage, can only be changed by mutual consent. I show that this feature implies that workers have a strategic advantage in the wage negotiations when they try to prevent a cut in nominal wages. If inflation is so...