Macroeconomic volatilities and the labor market: First results from the euro experiment

Christian Merkl and Tom Schmitz

European Journal of Political Economy, 2011, vol. 27, issue 1, 44-60

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.

Keywords: Labor; market; institutions; Output; and; inflation; volatility; Labor; turnover; costs; Unemployment; benefits; Unemployment; Eurozone (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0176-2680(10)00030-3
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Macroeconomic Volatilities and the Labor Market: First Results from the Euro Experiment (2010)
Working Paper: Macroeconomic volatilities and the labor market: first results from the euro experiment (2009)
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:eee:poleco:v:27:y:2011:i:1:p:44-60

Access Statistics for this article

European Journal of Political Economy is currently edited by J. De Haan, A. L. Hillman and H. W. Ursprung

More articles in European Journal of Political Economy from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).