Empirical work on the impacts of labour market institutions has produced mixed results. Much of this literature is based on reduced form regressions that are subject to severe econometric and measurement issues. This paper develops a framework to study the impact of labour market institutions in...

In the presence of rigid prices, movements in the exchange rate help to absorb external shocks and to reduce changes in net exports. However, they also affect firms’ competitiveness, marginal costs, and labor demand. In countries where labor market institutions hinder wage adjustment (for...

This paper examines the effect of monopolistic labour unions' behavior on governments' incentives to undertake labour market reform, inside and outside a symmetric and an asymmetric monetary union (MU). Incentives for reform are increased inside the MU when governments and labour unions move...

Do labor market reforms initiated in periods of loose monetary policy yield different outcomes from those that were introduced in periods when monetary tightening prevailed? Since economic theory usually pays attention to the steady state change and ignores business cycle interactions of...

This paper explores the impact of country size on labour market flexibility in a monetary union with a common monetary policy as conducted in EMU. I apply a Barro-Gordon framework and test its result empirically for EMU. Results confirm that small countries demand higher labour market...

In this paper, we explore the role of labor markets for monetary policy in the euro area in a New Keynesian model in which labor markets are characterized by search and matching frictions. We first investigate to which extent a more flexible labor market would alter the business cycle behavior...