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This chapter is concerned with competition between the European central bank, the German labour union, and the French labour union. We assume that the central bank and the labour unions decide sequentially. First the central bank decides, then the labour unions decide. In addition, we assume that the central bank and the labour unions follow a cold-turkey strategy.

1) Introduction. In this chapter we assume that the countries only differ in size. To be more specific, we assume that the German economy is large and the French economy is small. More precisely, we assume that full-employment output in Germany is large and full-employment output in France is small. As a result, the size of the wage policy multiplier depends on the size of the country. In the numerical example, an increase in German nominal wages of 100 causes a decline in German output of 200. And an increase in French nominal wages of 100 causes a decline in French output of 100.

1) Introduction. We assume that the countries only differ in behavioural functions. To be more specific, we assume that the countries differ in wage policy multipliers. In the numerical example, an increase in German nominal wages of 100 causes a decline in German output of 200. And an increase in French nominal wages of 100 causes a decline in French output of 100.

1) The output model. This chapter deals with competition between the European central bank, the German labour union, and the French labour union. The member countries are the same size and have the same behavioural functions. As a point of departure, take the output model. It can be represented by a system of two equations: Here Y denotes German output, Y is French output, M is European money supply, W is German nominal wages, and W is French nominal wages. The endogenous variables are German output and French output.

1) Introduction. For ease of exposition we assume that the monetary union consists of three countries, say Germany, France and Italy. The member countries are the same size and have the same behavioural functions. An increase in German nominal wages lowers German output. Correspondingly, an increase in French nominal wages lowers French output. And an increase in Italian nominal wages lowers Italian output. For ease of exposition we assume that wage policy in one of the countries has no effect on output in the other countries. In the numerical example, an increase in German nominal wages of 100 causes a decline in German output of 100. Correspondingly, an increase in French nominal wages of 100 causes a decline in French output of 100. And an increase in Italian nominal wages of 100 causes a decline in Italian output of 100. For ease of exposition we assume that the wage policy multiplier is 1. This assumption is consistent since the wage rate is defined in nominal terms while output is defined in real terms.

1) The static model. This chapter deals with competition between the European central bank, the German labour union, the French labour union, and the Italian labour union. As a point of reference, consider the static model. It can be represented by a system of three equations: Y denotes German output, Y is French output, Y is Italian output, M is European money supply, W is German nominal wages, W is French nominal wages, W is Italian nominal wages, α is the monetary policy multiplier, and γ is the wage policy multiplier. The endogenous variables are German output, French output, and Italian output.

1) Introduction. This chapter deals with cooperation between the European central bank, the German labour union, the French labour union, and the Italian labour union. As a starting point, take the output model. It can be represented by a system of three equations: Here Y denotes German output, Y is French output, Y is Italian output, M is European money supply, W is German nominal wages, W is French nominal wages, W is Italian nominal wages, α is the monetary policy multiplier, and γ is the wage policy multiplier. The endogenous variables are German output, French output, and Italian output

For ease of exposition we assume that the euro area consists of two countries, say Germany and France. The member countries are the same size and have the same behavioural functions. This part deals with competition between the European central bank, the German government, the French government, the German labour union, and the French labour union. As a point of reference, consider the static model. It can be represented by a system of two equations:

The synopsis refers to the interactions between The synopsis is based on a numerical example. The initial output gap in Germany is 60, and the initial output gap in France is 30. As a result, taking the sum over all periods, Table 8.1 shows: Obviously, the result depends on the type of policy system.

1) Introduction. For ease of exposition we make the following assumptions. The monetary union consists of two countries, say Germany and France. The member countries are the same size and have the same behavioural functions. An increase in European money supply raises both German output and French output, to the same extent respectively. In the numerical example, an increase in European money supply of 100 causes an increase in German output of 100 and an increase in French output of equally 100.