TY  - RPRT
        AU  - Merkl, Christian
AU  - Schmitz, Tom
        TI  - Macroeconomic Volatilities and the Labor Market: First Results from the Euro Experiment
        PY  - 2010/May/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 4924
        UR  - https://www.iza.org/publications/dp4924
        AB  - This paper analyzes the effects of different labor market institutions 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 across member states, but labor market characteristics have remained very diverse. We use a New Keynesian model with unemployment to predict the effects of different labor market institutions on macroeconomic volatilities. In our subsequent empirical estimations, we find that higher labor turnover costs have a statistically significant negative effect on output volatility, while replacement rates have a positive effect, both of which are in line with theory. While labor market institutions have a large effect on output volatility, they do not seem to have much of an effect on inflation volatility, which can also be rationalized by our theoretical model.
        KW  - unemployment benefits
KW  - labor turnover costs
KW  - output and inflation volatility
KW  - labor market institutions
KW  - unemployment
KW  - eurozone
        ER  -