MONETARY-POLICY GAMES AND COALITIONS IN A 2-COUNTRY MODEL WITH UNIONIZED WAGE SETTING

We show that in interdependent, unionised economies co-operation betwe en wage-setters at home and abroad improves both their own positions a nd social welfare relative to universal Nash play. Moreover, a move fr om all-round Nash play to co-operation between home and foreign unions and between home and foreign policymakers may produce Pareto improvem ents, or outcomes that are preferable to Nash play for the coalition a s a whole. However, intra-national coalitions may lack the support of unions. Such coalitions unambiguously improve the policymakers positio n. However, in an interdependent world, they do not necessarily make t he unions better off relative to other regimes.