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Social Partnership and Exchange Rate Policy. — A Gametheoretic Approach

Conference paper
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Part of the Studies in Empirical Economics book series (STUDEMP)

Abstract

Many central banks in Europe fix the exchange rate of their currency to the Deutsche Mark. The arguments for choosing this policy center on a simple idea: A fixed exchange rate to an inflation-free currency of a big neighbour forces the exposed sector to keep constant its prices and wages. Otherwise the exposed sector would price itself out of the international and domestic market. What concerns the prices and wages of the sheltered sector it was hoped that they would not increase due to some form of solidarity among entrepreneurs or workers within a country [Frisch, 1976], or due to price and wage controls by the state or by the social partners, or due to sufficiently important substitution effects between the sectors.

Keywords

Exchange Rate Central Bank Trade Union Real Exchange Rate Domestic Firm 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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References

  1. Dornbusch, R. (1987): “Exchange Rates and Prices.” American Economic Review 77, pp. 93–106.Google Scholar
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  4. Selten, R. (1975) “Reexamination of the Perfectness Concept for Equilibrium Points in Extensive Games.” International Journal of Game Theory, pp. 25–55.Google Scholar
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Copyright information

© Springer-Verlag Berlin Heidelberg 1995

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