Centralized money, fragmented labor: wage bargaining and asymmetric adjustment in EMU

Abstract This paper develops an analytical framework for analyzing how the interaction between the centralized monetary authority of the European Monetary Union (EMU) and nationally diverse wage bargaining institutions shapes asymmetric macroeconomic adjustment across member states. We draw on the literature of central bank credibility, collective bargaining, and EMU governance, and we argue that the interaction between a common monetary regime and heterogeneous labor-market institutions reallocates adjustment pressures toward labor markets. This, in turn, generates different employment and reform trajectories. A comparative overview of selected EMU member states provides the institutional context within which our framework highlights how bargaining coordination, employer organization, economic openness, and economic size shape the transmission of monetary policy. The paper also discusses the limitations of the monetary credibility and wage bargaining framework in light of recent inflationary dynamics, distributive conflict, and structural change. By integrating this literature, the paper conceptualizes wage bargaining as a key transmission channel through which centralized monetary policy generates heterogeneous adjustment outcomes across the euro area.