This paper is part of an IRCHSS'sponsored research project on An Analysis of the Impact of European Monetary Union on Irish Macroeconomic Policy. It benefits from the comments made by Philip Lane, Massimo Giuliodori, Patrick Honohan and an anonymous referee.
FISCAL SHOCKS AND REAL WAGES†
Article first published online: 3 AUG 2011
Copyright © 2011 John Wiley & Sons, Ltd.
International Journal of Finance & Economics
Volume 17, Issue 3, pages 203–220, July 2012
How to Cite
Bénétrix, A. S. (2012), FISCAL SHOCKS AND REAL WAGES. Int. J. Fin. Econ., 17: 203–220. doi: 10.1002/ijfe.452
- Issue published online: 8 JUN 2012
- Article first published online: 3 AUG 2011
- government spending shocks;
- real wages;
- panel VAR;
- European Monetary Union
This paper studies the impact of fiscal shocks in a panel of eleven euro area member countries. It contributes to the existing literature by providing new empirical evidence on the effects of different types of spending shocks on real wages. The main finding is that an increase in government spending raises the real wage. However, its magnitude depends on the spending type. Shocks to government investment and to the number of public employees generate responses that are at the extremes of the wage response spectrum. The former produces the greatest effect, whereas the latter has zero impact. Copyright © 2011 John Wiley & Sons, Ltd.