Missing wage growth in the euro area: is the wage Philips curve non-linear?
David Byrne () and
Zivile Zekaite ()
No 9/EL/18, Economic Letters from Central Bank of Ireland
This Letter examines the relationship between wage growth and labour market tightness in the euro area, frequently represented by the Phillips curve. It predicts that falling unemployment should lead to greater wage growth. A key question for policymakers post-crisis is whether this relationship has changed or broken down. We show that the euro area wage Phillips curve is non-linear. When labour market slack is elevated, tightening does not lead to greater wage growth. The relationship only returns when slack is at lower levels. This finding explains why wage growth did not increase when the labour market tightened between 2013 and 2016, and why stronger wage growth has been evident since 2017.
New Economics Papers: this item is included in nep-eec and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
https://www.centralbank.ie/docs/default-source/pub ... ekaite).pdf?sfvrsn=7 (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cbi:ecolet:9/el/18
Access Statistics for this paper
More papers in Economic Letters from Central Bank of Ireland Contact information at EDIRC.
Bibliographic data for series maintained by Fiona Farrelly ().