Labor market reform and price stability: An application to the Euro Area

• 成果类型: Article
• 署名作者: Thomas, Carlos; Zanetti, Francesco
• 署名单位: Banco de Espana; Bank of England
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2009.06.002
• 发表日期: 2009
• 页码: 885-899
• 关键词: Labor market policies; Search and matching frictions; new Keynesian model

摘要

Central bankers frequently suggest that labor market reform may be beneficial for inflation management. This paper investigates this topic by simulating the effects of reductions in firing costs and unemployment benefits on inflation volatility in the Euro Area, using an estimated New Keynesian model with search and matching frictions. Qualitatively, changes in labor market policies alter the volatility of inflation in response to shocks, by affecting the volatility of the three components of real marginal costs (hiring costs, firing costs and wage costs). Quantitatively, we find, however, that neither policy is likely to have an important effect on inflation volatility, due to the small contribution of hiring and firing costs to inflation dynamics. (C) 2009 Elsevier B.V. All rights reserved.