Marco Buti, Alessandro Turrini, 06 October 2017

Exceptionally low wage growth is at the heart of low Eurozone inflation, while wage growth differentials are not contributing enough to a symmetric rebalancing in the currency union. This column discusses the role that wage developments at the Eurozone level can play in supporting monetary policy and fostering external rebalancing. Although wage setting is a prerogative and not a policy under direct government control, a rationale for the coordination of a number of government policies affecting competitiveness exists, and potential benefits are apparent in the current context.

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