Munich Personal RePEc Archive

Country Size and Labor Market Flexibility in the European Monetary Union: Why Small Countries Have more Flexible Labor Markets

Zemanek, Holger (2009): Country Size and Labor Market Flexibility in the European Monetary Union: Why Small Countries Have more Flexible Labor Markets.

WarningThere is a more recent version of this item available.
[img]
Preview
PDF
MPRA_paper_16482.pdf

Download (232Kb) | Preview

Abstract

This paper explores the impact of country size on labor 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 labor market flexibility than large countries. Small countries use labor market flexibility to be protected against monetary policy in favor of large countries and use flexibility as a substitute for monetary policy. Thereby, national inflation volatilities and unemployment volatility are important determinants. Business cycle synchronization reduces the need of small countries for additional labor market flexibility.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.