Bargaining institutions and the monetary regime: a cross-national comparison and its implications for European monetary union

Article abstract:

The interaction between bargaining and monetary policy involves three relationships: the interaction of the bargainers with (a) each other; (b) the monetary regime; and (c) their rank and file. Research has centred on (a) and (b) and neglected (c). However, in practice, interaction (c) gains in importance, since bargaining is a multi- level process in the eurozone. Analytically, this interaction should not be neglected, since the monetary regime can target the bargainers more effectively than their rank and file. This paper conceptualises the interaction between bargaining and monetary policy in a way which includes all three relationships. Based on a comparison of fifteen European countries, it is shown that the responsiveness of alternative bargaining institutions to the monetary regime depends on their capacity for making the rank and file comply, and that these institutions also differ in which monetary parameter they are sensitive to. The implications of these findings for EMU are discussed in the paper's final section.