Financial Crisis, Labour Markets and Institutions by Fadda Sebastiano;Tridico Pasquale;

Author:Fadda, Sebastiano;Tridico, Pasquale;
Language: eng
Format: epub
Publisher: Taylor & Francis Group

Inflation and competitiveness policies

Finding a way of effectively constraining inflation without resorting to deflationary measures has been a recurring issue throughout the post-war period. It has been indicated above and more extensively argued elsewhere (Arestis and Sawyer, 2008, 2012) that inflation targeting is ineffectual and alternatives have to be developed. However, as noted above, within the EMU there had been relatively low inflation but the inflation target of 0 to 2 per cent was frequently missed albeit by a small margin, and more significantly for EMU there were persistent differences of inflation between member countries. Within EMU it is argued here that mechanisms have to be developed which will in effect coordinate wage developments and prices across EMU countries. A key aspect here is that the evolution of competitiveness between EMU member countries. It is clear that monetary policy cannot address differential inflation problems.

There is then the need to develop wage and price coordination mechanisms at the EMU level through which not only the general pace of inflation can be addressed but more significantly the similarity of the pace of inflation across countries be ensured.

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