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The macroeconomic impact of euro area labour market reforms: evidence from a narrative panel VAR

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  • Rünstler, Gerhard

Abstract

Using new quarterly narrative evidence, this paper examines the macroeconomic impact of reforms of unemployment benefits (UB) and employment protection legislation (EPL) in the euro area from a Bayesian narrative panel VAR. The approach complements existing micro-econometric evidence by aligning short- and mediumterm effects in a unified framework and assessing state dependencies. Liberalising reforms result in temporary wage declines and highly persistent increases in economic activity and employment. In contrast to UB reforms, the effects of EPL reforms on employment emerge only gradually. JEL Classification: E32, J08, O43

Suggested Citation

  • Rünstler, Gerhard, 2021. "The macroeconomic impact of euro area labour market reforms: evidence from a narrative panel VAR," Working Paper Series 2592, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20212592
    Note: 339116
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    References listed on IDEAS

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    1. Katarzyna Budnik & Gerhard Rünstler, 2023. "Identifying structural VARs from sparse narrative instruments: Dynamic effects of US macroprudential policies," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(2), pages 186-201, March.

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    More about this item

    Keywords

    discriminant regression; employment protection legislation; narrative identification; unemployment benefits;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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