A Mixed Frequency BVAR for the Euro Area Labour Market Consolo, Agostino; Foroni, Claudia; Martínez Hernández, Catalina
Oxford bulletin of economics and statistics,
October 2023, Letnik:
85, Številka:
5
Journal Article
Recenzirano
Odprti dostop
We introduce a Bayesian mixed frequency VAR model for the aggregate euro area labour market that features a structural identification via sign restrictions. The purpose of this paper is twofold: we ...aim at (i) providing reliable and timely forecasts of key labour market variables and (ii) enhancing the economic interpretation of the main movements in the labour market. We find satisfactory results in terms of nowcasting and forecasting, especially for employment growth. Furthermore, we look into the shocks that drove the labour market and macroeconomic dynamics from 2002 to 2022, with an insight also on the COVID‐19 recession. While demand shocks were the main drivers during the Global Financial Crisis, technology and wage bargaining factors, reflecting the degree of lockdown‐related restrictions and job retention schemes, have been important drivers of key labour market variables during the pandemic.
The Federal Reserve's interest rate hikes in 2022-23 raised concerns about spillover effects on smaller emerging market and developing economies. Historically, ahigherU.S. federal funds ratehas been ...associated with international investors withdrawing capital from emerging markets, which can lead to lower economic activity and depreciating exchange rates in these markets-and, in turn, greater financial vulnerability. To reduce capital outflows, central banks in emerging markets can tighten their own monetary policy rates to increase yields on debt securities. But raising interest rates comes with trade-offs, and how central banks in emerging markets respond to tighter U.S. monetary policy remains an empirical question. Johannes Matschke, Alice von Ende-Becker, and Sai A. Sattiraju examine the three most recent U.S. policy tightening cycles to analyze when and why central banks in emerging markets raised their own policy rates. They find that while emerging markets sometimes raised rates in response to capital outflows or a depreciation of their currency resulting from U.S. monetary policy, they more frequently raised rates in response to domestic inflationary pressures. Their findings provide new descriptive evidence on the conduct of monetary policy in emerging markets.
