To the extent that labor unions attain higher wages during periods of currency depreciation, the resulting wage inflation reduces the improving competitiveness of a country's business firms caused by depreciation.

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When a country's currency depreciates, its exports become cheaper and more competitive in the global market, leading to an increase in demand for its products. This can lead to higher profits for businesses, which may then lead to higher wages for workers. However, if unions negotiate wage increases that exceed productivity gains, this can lead to wage inflation and reduce the cost advantage of the country's exports, which can reduce competitiveness in the long run.

To the Extent That Labor Unions Attain Higher Wages During