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Shocks and rigidities as determinants of the CEE labor markets’ performance - a panel SVECM approach -

Author

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  • Maciej Bukowski
  • Grzegorz Koloch
  • Piotr Lewandowski

Abstract

We analyze with panel SVECM the impact of real wage, productivity, labor demand and supply shocks on the eight CEE economies during 1996-2007. We use a set of long-run restrictions, derived from the DSGE model with explicitly modeled labor market, to identify these structural shocks. Fluctuations in foreign demand are controlled for. We find that the propagation of shocks on CEE labor markets resembles the one found for OECD countries. Labor demand shocks emerge as the main determinant of employment and unemployment variability in the short-run. The retrospective simulations of the model show that the wage adjustments were important factor behind the diverse labor market performance of the countries studied. Downward wage rigidities were especially binding after employment-contracting shocks in Poland, Czech Republic, Lithuania.

Suggested Citation

  • Maciej Bukowski & Grzegorz Koloch & Piotr Lewandowski, 2008. "Shocks and rigidities as determinants of the CEE labor markets’ performance - a panel SVECM approach -," IBS Working Papers 2/2008, Instytut Badan Strukturalnych.
  • Handle: RePEc:ibt:wpaper:wp022008
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment; Rigidities; Transition economies; Cointegration; Structural VECM; Panel econometrics; DSGE models;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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