IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

An assessment of the national labour market

Listed author(s):
  • Erik Walch


Registered author(s):

    In the framework of its participation in the decision-making process of the single monetary policy, the BCL, among other things, needs to analyse the national economy. Different parts of this paper address different audiences: in order to expose to the general and non-expert public why central banks are interested in labour markets, the first section begins with the basic link between monetary policy and labour markets. The discussion reviews the arguments indicating that in the long run a loose attitude towards inflation does not lead to lower unemployment. In addition, the discussion sketches out to what extent the labour market provides useful information for the conduct of an appropriate monetary policy. In the second part, the paper focuses on the particularities of the Luxembourg labour market and its impact on the price level. The standard Phillips curve relationship is altered by a number of circumstances: monetary policy is fixed for the euro area as a whole, while the evolution of the labour market is a concern for local policy makers. The very large share of non-residents in domestic employment is the central aspect of Luxembourg's labour market. In addition, the smallness of the economy is associated with a very high degree of openness in terms of exports and imports. These characteristics affect the determination of equilibrium unemployment and the price level. Since residents' low participation rates are often criticised, the size of the potential reserve this represents for the labour market is estimated. This potential reserve is very limited compared with the current speed of job creation, so it remains crucial for the national labour market to remain attractive to cross-border commuters and immigrants. The wage bargaining process and non-wage labour costs also play an important role in the national labour market performance. Finally, aspects of resident unemployment are discussed in the light of job search theory.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by Central Bank of Luxembourg in its series BCL working papers with number 1.

    in new window

    Length: 59 pages
    Date of creation: Apr 2001
    Handle: RePEc:bcl:bclwop:bclwp001
    Contact details of provider: Web page:

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    in new window

    1. Erica L. Groshen & Mark E. Schweitzer, 1994. "The effects of inflation on wage adjustments in firm-level data: grease or sand?," Working Paper 9418, Federal Reserve Bank of Cleveland.
    2. Felderer, Bernhard & Homburg, Stefan, 2005. "Makroökonomik und neue Makroökonomik," EconStor Books, ZBW - German National Library of Economics, number 92556, December.
    3. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:bcl:bclwop:bclwp001. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.