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Asymmetric Labour Markets in a Converging Europe: Do Differences Matter?

Published online by Cambridge University Press:  26 March 2020

Ray Barrell  and
Karen Dury
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Abstract

In this paper we investigate whether differences we observe in European labour market transmission mechanisms matter for monetary policy design. We are particularly concerned with the robustness of the choice of rule by the European Central Bank (ECB) but we also comment on the choice of rules in the UK. Three different models of labour markets are constructed, one where the relationships are estimated separately, one where the most statistically acceptable commonalities across countries are imposed and one where common relationships are imposed across all countries. Panel estimation techniques are used to test for commonalities. These models are embedded into the National Institute's Global Econometric Model, NiGEM, and stochastic simulations are run to evaluate different monetary policy rules.

Type
Articles
Information
National Institute Economic Review , Volume 183 , January 2003 , pp. 56 - 65
Copyright
Copyright © 2003 National Institute of Economic and Social Research

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Footnotes

∗

We would like to thank Martin Weale, Ian Hurst and Nigel Pain for their input into this paper, and seminar participants at the European Economic Association in Lausanne, CEPII in Paris, and the Macro Workshop run by Prof. Ken Wallis at Warwick University for their comments. Any errors remain ours. This paper was written whilst Dury was a member of National Institute research team.

The research was funded by grant L138251022 on the ESRC ‘Evolving Macroeconomy’ Programme.

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