EconPapers    
Economics at your fingertips  
 

German wage moderation and European imbalances: Feeding the global VAR with theory

Timo Bettendorf () and Miguel Leon-Ledesma ()

No 15/2015, Discussion Papers from Deutsche Bundesbank

Abstract: German labor market reforms in the 1990s and 2000s are generally believed to have driven the large increase in the dispersion of current account balances in the Euro Area. We investigate this hypothesis quantitatively. We develop an open economy New Keynesian model with search and matching frictions from which we derive robust sign restrictions for a wage bargaining shock. We then impose these restrictions on a Global VAR consisting of Germany and 8 EMU countries to identify a wage bargaining shock in Germany. Our results show that, although the German current account was significantly affected by wage bargaining shocks, their contribution to European current account imbalances was negligible. We conclude that the reduction in bargaining power of German unions after labor market reforms cannot be the lone driver of European imbalances.

Keywords: european imbalances; German wage moderation; DSGE; Global VAR; sign restrictions (search for similar items in EconPapers)
JEL-codes: F10 F32 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc, nep-dge, nep-eec and nep-opm
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/111921/1/829617612.pdf (application/pdf)

Related works:
Working Paper: German Wage Moderation and European Imbalances: Feeding the Global VAR with Theory (2015) Downloads
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:zbw:bubdps:152015

Access Statistics for this paper

More papers in Discussion Papers from Deutsche Bundesbank Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - German National Library of Economics ().

 
Page updated 2018-10-21
Handle: RePEc:zbw:bubdps:152015