نوسانات اقتصاد کلان و بازار کار: اولین نتایج حاصل از آزمایش یورو

We analyze the effects of labor market institutions (LMIs) on inflation and output volatility. The eurozone offers an unprecedented experiment for this exercise: since 1999, no national monetary policies have been implemented that could account for volatility differences. We use a New Keynesian model with unemployment to predict the effects of LMIs. In our empirical estimations, we find that higher labor turnover costs have a significant negative effect on output volatility, while replacement rates have a positive effect, both in line with theory. While LMIs have a large effect on output volatility, they do not matter much for inflation volatility.

What are the effects of different labor market institutions on the volatility of macroeconomic variables (macroeconomic volatilities henceforth), such as inflation and output? With risk averse agents and inflation costs, the answer to this question has important welfare and policy implications. It is highly relevant both for the (optimal) design of labor market institutions and for (optimal) fiscal and monetary policy. Further, it sheds light on the question which institutions should be integrated into labor market and business cycle models. There is a broad theoretical literature that touches this issue indirectly and a very recent empirical cross-country literature dealing with it more directly.1 However, so far there is no generally accepted view on the effect of labor market institutions on macroeconomic volatilities. We will argue below that the eurozone offers an unprecedented and so far largely unexplored experiment to analyze this question empirically.

This paper shows theoretically and empirically that labor turnover costs and replacement rates matter for output volatilities within the eurozone. The former have a dampening effect, while the latter increases output volatility. Although the empirical results are based on a small dataset, they offer first insights into how heterogeneous labor market institutions act in a monetary union. This has important implications for the ability of labor market models to replicate macroeconomic volatilities and for the type of labor market institutions that should be integrated into business cycle models.