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ULC Dynamics of Euro Area Countries and SR in the Long Run

Author

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  • Sandra Tatierska

    (Research Department, National Bank of Slovakia)

Abstract

In this paper we analyse the ability of national unit labor costs of euro area countries to converge to the weighted average of the EMU and in the case of SR also to the weighted average of V4 countries. Co-integration between individual and average nominal ULC indices was examined through static (OLS) and dynamic (VEC) tests and estimates. We discovered a significant co-integration under an absolute convergence of the ULC for almost all countries (incl. SR) to the equilibrium, which was determined mainly by the weighted average of the euro area. In general, a significant convergence would enable different levels of nominal ULC but not long-term differences in their development, which is an important criterion for sustaining the competitiveness of a country without an exchange rate mechanism.

Suggested Citation

  • Sandra Tatierska, 2008. "ULC Dynamics of Euro Area Countries and SR in the Long Run," Working and Discussion Papers WP 6/2008, Research Department, National Bank of Slovakia.
    • Handle: RePEc:svk:wpaper:1002
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    More about this item

    Keywords

    ULC; competitiveness; convergence; co-integration; VEC;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F15 - International Economics - - Trade - - - Economic Integration
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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