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Time-varying wage Phillips curves in the euro area with a new measure for labor market slack

Dennis Bonam (), Jakob de Haan () and Duncan van Limbergen

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: Recently, the unemployment gap in the euro area has fallen markedly. However, wages increased less than predicted by traditional Phillips curves. Using Bayesian methods, we estimate the wage Phillips curve with time-varying parameters. We consider alternative measures for labor market slack, namely the unemployment gap and the European Commission's labor shortage indicator. Using the latter indicator, we find a steepening of the wage Phillips curve in Italy and France, and a stable Phillips curve in the Netherlands after the crisis. In Germany (Spain), both measures suggest a recent flattening (steepening) of the wage Phillips curve.

Keywords: Wage Phillips curve; Labor shortage indicator; Time-varying parameters (search for similar items in EconPapers)
JEL-codes: E24 E31 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-mac
Date: 2018-03
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:587

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