Macroeconomic Volatilities and the Labor Market: First Results from the Euro Experiment

Merkl C, Schmitz T (2011)


Publication Language: English

Publication Type: Journal article

Publication year: 2011

Journal

Publisher: Elsevier

Book Volume: 27

Pages Range: 44-60

Journal Issue: 1

DOI: 10.1016/j.ejpoleco.2010.05.002

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.

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How to cite

APA:

Merkl, C., & Schmitz, T. (2011). Macroeconomic Volatilities and the Labor Market: First Results from the Euro Experiment. European Journal of Political Economy, 27(1), 44-60. https://dx.doi.org/10.1016/j.ejpoleco.2010.05.002

MLA:

Merkl, Christian, and Tom Schmitz. "Macroeconomic Volatilities and the Labor Market: First Results from the Euro Experiment." European Journal of Political Economy 27.1 (2011): 44-60.

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