Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5068235 | European Journal of Political Economy | 2011 | 17 Pages |
Abstract
We analyze the effects of labor market institutions (LMIs) on inflation and output volatility. The eurozone offers an unprecedented experiment for this exercise: since 1999, no national monetary policies have been implemented that could account for volatility differences. We use a New Keynesian model with unemployment to predict the effects of LMIs. In our empirical estimations, we find that higher labor turnover costs have a significant negative effect on output volatility, while replacement rates have a positive effect, both in line with theory. While LMIs have a large effect on output volatility, they do not matter much for inflation volatility.
Related Topics
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Economics and Econometrics
Authors
Christian Merkl, Tom Schmitz,