Labour Market Institutions and Inflation Differentials in the EU

Gaetano D'Adamo () and Riccardo Rovelli

No 9389, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Adopting a simple Phillips curve framework, we show that different labour market institutions across EU countries are associated with significant differences in the response of inflation to unemployment and exchange rate shocks. More wage coordination and higher union density flatten the Phillips curve and increase the inflation response to the real exchange rate, i.e. the exchange rate pass-through. In addition, using a new approach to the classification of goods and services as "traded" or "non-traded", we show that both these institutional effects are significantly stronger for the more exposed (traded) sector.

Keywords: sectoral inflation differentials; inflation determinants; labour market institutions; EU 27 (search for similar items in EconPapers)
JEL-codes: E31 J50 J60 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2015-09
New Economics Papers: this item is included in nep-cba, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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