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Aggregate Wage Flexibility in Selected New EU Member States

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  • Ian Babetskii

Abstract

A fixed exchange rate regime eliminates one degree of freedom in absorbing macroeconomic shocks. Therefore, there is a call for higher labor market flexibility in countries which are members of the monetary union or those which intend to join the monetary union. Focusing on the cross-country analysis of labor markets in the enlarged European Union, this paper aims to assess empirically the role of aggregate wages as a correction mechanism for dealing with economic disturbances. A comparable quarterly data-set is constructed covering 1995-2004 for four central European states (CE-4), four new EU members already participating in the Exchange Rate Mechanism-II (ERM-II participants), and three peripheral members of the euro area (EMU- 3). We apply classical time series/panel, Bayesian, and cointegration techniques to determine the extent to which aggregate wages can accommodate shocks in the economy. The macroeconomic data does not seem to support the argument that real wages are flexible in the CE-4, the ERM-II participants, and the EMU-3.

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Bibliographic Info

Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2006/1.

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Date of creation: Apr 2006
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Handle: RePEc:cnb:wpaper:2006/1

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Keywords: . ERM-II; euro adoption; labor market; wage flexibility.;

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Citations

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Cited by:
  1. Van Poeck Andrè & Veiner Maret & Plasmans Joseph, 2007. "Wage flexibility in the new European Union members: How different form the “old” members?," wp.comunite 0006, Department of Communication, University of Teramo.
  2. Pavel Gertler, 2010. "The wage curve: A panel data view of labour market segments," Working and Discussion Papers WP 3/2010, Research Department, National Bank of Slovakia.
  3. Eamets, Raul, 2013. "Labour Market and Labour Market Policies During the Great Recession: The Case of Estonia," IZA Policy Papers 60, Institute for the Study of Labor (IZA).
  4. Manuela Goretti, 2008. "Wage-Price Setting in New EU Member States," IMF Working Papers 08/243, International Monetary Fund.
  5. Van Poeck A. & Veiner M., 2007. "Wage flexibility in the new European Union members: how different from the old?," Working Papers 2007016, University of Antwerp, Faculty of Applied Economics.
  6. Michał Brzoza-Brzezina & Jacek Socha, 2007. "Downward nominal wage rigidity in Poland," National Bank of Poland Working Papers 41, National Bank of Poland, Economic Institute.
  7. Vladimir Gligorov & Anna Iara & Michael Landesmann & Robert Stehrer & Hermine Vidovic, 2008. "Western Balkan Countries: Adjustment Capacity to External Shocks, with a Focus on Labour Markets," wiiw Research Reports 352, The Vienna Institute for International Economic Studies, wiiw.
  8. Marianna Cervena, 2012. "Base Wage Rigidities: Evidence From a Survey of Slovak Firms," Working and Discussion Papers WP 3/2012, Research Department, National Bank of Slovakia.
  9. Marianna Cervena, 2012. "Labor Cost Adjustment: Evidence From a Survey of Slovak Firms," Working and Discussion Papers WP 4/2012, Research Department, National Bank of Slovakia.
  10. Lupu, Dan, 2012. "Public sector pay policy in East European countries," MPRA Paper 37720, University Library of Munich, Germany.
  11. Jan Babecky & Oxana Babetskaia-Kukharchuk & Kamil Galuscak & Dana Hajkova & Jaroslav Hermanek & Tomas Holub & Roman Horvath & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Petr Kral & Filip Novot, 2008. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2008," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number as08 edited by Dana Hajkova, August.
  12. Gunther Schnabl, 2005. "The Russian Currency Basket: The Rising Role of the Euro for Russia’s Exchange Rate Policies," International Finance 0512005, EconWPA.
  13. Gunther Schnabl & Christina Ziegler, 2008. "Exchange Rate Regime and Wage Determination in Central and Eastern Europe," CESifo Working Paper Series 2471, CESifo Group Munich.

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