Bettendorf, Timo, Leon-Ledesma, Miguel A. (2019) German Wage Moderation and European Imbalances: Feeding the Global VAR with Theory. Journal of Money, Credit, and Banking, 51 (2-3). pp. 617-653. ISSN 1538-4616. (doi:10.1111/jmcb.12517) (KAR id:63206)
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Official URL: https://doi.org/10.1111/jmcb.12517 |
Abstract
German labor market reforms in the 1990s and 2000s are generally believed to have driven the large increase in the dispersion of current account balances in the Euro Area. We investigate this hypothesis quantitatively. We develop a 3-region open economy New Keynesian model with search and matching frictions from which we derive robust sign restrictions for wage bargaining and matching efficiency shocks which we term wage moderation shocks. We impose these restrictions on a Global VAR consisting of Germany and 8 EMU countries to identify a wage moderation shock in Germany. Our results show that, although the German current account was significantly affected by wage moderation shocks, their contribution to European current account imbalances was negligible. We conclude that the German labor market reforms cannot be the lone driver of European imbalances.
Item Type: | Article |
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DOI/Identification number: | 10.1111/jmcb.12517 |
Subjects: | H Social Sciences > HB Economic Theory |
Divisions: | Divisions > Division of Human and Social Sciences > School of Economics |
Depositing User: | Miguel Leon-Ledesma |
Date Deposited: | 04 Sep 2017 12:16 UTC |
Last Modified: | 05 Nov 2024 10:58 UTC |
Resource URI: | https://kar.kent.ac.uk/id/eprint/63206 (The current URI for this page, for reference purposes) |
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