The ERM effect, conflict and inflation in the European Union

Sarantis, Nick and Stewart, Chris (2000) The ERM effect, conflict and inflation in the European Union. International Review of Applied Economics, 14(1), pp. 25-43. ISSN (print) 0269-2171

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Abstract

This paper investigates price inflation expectations and wage determination in the ERM member countries with the aim of assessing the importance of the ERM effect and distributional conflict. We have found strong evidence of an ERM effect in the inflationary process of participating countries, but this effect manifests itself primarily through structural changes in labour markets rather than through importing Bundesbank's reputation. This evidence questions the tendency to model the ERM as a credibility-reputation game. Inflation expectations for all ERM countries are strongly influenced by movements in unit labour costs and demand, and secondarily by world commodity and oil prices. The empirical results provide strong support for the conflict approach to wage inflation.

Item Type: Article
Research Area: Economics and econometrics
Faculty, School or Research Centre: Faculty of Arts and Social Sciences > School of Economics (until November 2012)
Depositing User: Chris Stewart
Date Deposited: 24 Jun 2013 08:32
Last Modified: 24 Jun 2013 08:32
URI: http://eprints.kingston.ac.uk/id/eprint/25526

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