tailieunhanh - Encyclopedia of Finance Part 25

Chapter 47 POLICY COORDINATION BETWEEN WAGES AND EXCHANGE RATES IN SINGAPORE. Abstract Singapore’s unique experience in macroeconomic management involves the government’s engagement in a tripartite collective bargaining and its influence on the macroeconomic policy game in wages and exchange rates in response to inflation and output volatility. | Chapter 47 POLICY COORDINATION BETWEEN WAGES AND EXCHANGE RATES IN SINGAPORE YING WU Salisbury University USA Abstract Singapore s unique experience in macroeconomic management involves the government s engagement in a tripartite collective bargaining and its influence on the macroeconomic policy game in wages and exchange rates in response to inflation and output volatility. The period from the mid-1980s to mid-1990s features the policy game with a Nash equilibrium in the level of wages and exchange rates and a non-Nash equilibrium in wage growth and exchange rate appreciations. Based on the empirical evidence in this period the models used in this study suggests that wage and exchange-rate policies are a pair of complements both at their levels Nash equilibrium and at their percentage changes non-Nash equilibrium . Keywords wages effective exchange rates collective bargaining Nash equilibrium National Wages Council Monetary Authority of Singapore unit labor cost macroeconomic stabilization inflation unemployment . Introduction Adverse supply shocks often pose a dilemma for the Keynesian approach to aggregate demand management implementing expansionary monetary and fiscal policies tend to exacerbate inflation whereas the laissez-faire policy stance is conducive to acute and prolonged unemployment before the economy restores its natural rate level of output. As an alternative means to avoid the predicament and cope with demand shocks as well as supply shocks appropriate labor market policies including wage policy are recently gaining importance in macroeconomic Nevertheless wages tend to be sticky downward and it becomes difficult to attempt to reduce them due to the existence of strong labor unions or laws prohibiting such measures. The idea of instituting an agreement by unions and corporations to link wage growth with productivity growth though attractive often faces great political and economic challenges when it is put in .