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Non-linearity in the wage Phillips curve: Euro area analysis

David Byrne and Zivile Zekaite ()

Economics Letters, 2020, vol. 186, issue C

Abstract: This paper examines the sensitivity of wage growth to labour market tightness in the euro area. We show that the euro area wage Phillips curve is convex. When labour market slack is elevated, wage growth does not respond to changing labour market conditions. This finding explains “missing wage growth” as the labour market tightened between 2013 and 2016, and why stronger wage growth has been evident since 2017.

Keywords: Unemployment; Wage Phillips curve; Wage inflation; Monetary policy (search for similar items in EconPapers)
JEL-codes: E24 E52 J30 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.econlet.2019.07.006

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