Feeding the Global VAR with theory: Is German wage moderation to blame for European imbalances?

Konferenzbeitrag

This paper analyses the importance of German wage moderation in the context of European imbalances. Using information from a New Keynesian small open economy model with labor market frictions, we derive sign restrictions for a wage markup shock. This information enables us to identify a German wage markup shock by imposing restrictions on the impulse response functions of German variables in a Global VAR model. We find that negative German wage markup shocks do generally cause an improvement of the domestic trade balance and a deterioration of foreign trade balances in the Euro Area. However, they account only for a limited proportion of trade balance forecast error variances. Hence, German wage moderation cannot be the lone driver of European imbalances.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2013: Wettbewerbspolitik und Regulierung in einer globalen Wirtschaftsordnung - Session: International Trade and Finance ; No. D08-V1

Classification and Topics

• Classification: Wirtschaft ; Open Economy Macroeconomics ; Current Account Adjustment; Short-term Capital Movements ; Trade: General

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bettendorf, Timo
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/79710
• Last update: 10.03.2025, 11:44 AM CET