Wage Formation, Unemployment and Business Cycle in Latvia

Ginters Buss

No 2017/01, Working Papers from Latvijas Banka

Abstract: This paper integrates the alternating-offer wage bargaining (AOB) in a fully-fledged New Keynesian open economy model, and estimates it to the Latvian data. Further on, the paper studies the model's properties and compares them to alternative specifications for labour market modelling, i.e. the Nash wage bargaining with both Taylor-type wage rigidity and without exogenously imposed wage inertia, a reduced-form sharing rule, and a reduced-form wage rule. The goal of the paper is to choose a labour market modelling specification that suits best the needs of the central bank of Latvia in terms of macroeconomic modelling and forecasting. The results indicate that the AOB model suits the Latvian labour market well. The paper concludes with a simulation of economic effects from a permanent increase in the minimum-to-average wage ratio, as observed in Latvia, and finds potentially large losses of employment and output.

Keywords: alternating-offer bargaining; DSGE model; forecasting; minimum wage (search for similar items in EconPapers)
JEL-codes: E0 E2 E3 F4 (search for similar items in EconPapers)
Date: 2017-05-25
New Economics Papers: this item is included in nep-cis, nep-dge, nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.bank.lv/images/stories/pielikumi/publik ... umi/wp_1-2017_en.pdf (application/pdf)
http://www.macroeconomics.lv/sites/default/files/2017-05/wp_1-2017_en_0.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.macroeconomics.lv/sites/default/files/2017-05/wp_1-2017_en_0.pdf [301 Moved Permanently]--> https://www.macroeconomics.lv/sites/default/files/2017-05/wp_1-2017_en_0.pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ltv:wpaper:201701

Access Statistics for this paper

More papers in Working Papers from Latvijas Banka Contact information at EDIRC.
Bibliographic data for series maintained by Konstantins Benkovskis ().