The Role of Structural Changes in the Labour Market for Monetary Policy

This research project aims to investigate the impact of structural changes in the labour market on the effectiveness of monetary policy. While a large number of studies focus on the relationship between labour market rigidities and labour market outcomes, work on the relationship between structural features of the labour market and inflation is rather scarce. From a theoretical perspective, we will use a dynamic stochastic general equilibrium (DSGE) model. The predictions of the theoretical model are empirically tested using an interactive vector autoregressive panel model (IPVAR), in which the role of structural labour market conditions on the effectiveness of monetary policy on the aggregate economy is quantified. The project focuses on OECD countries and, in particular, on euro area countries and ECB monetary policy. The results allow to assess the usefulness of continuous monetary stimulus and are therefore of particular relevance for economic policy.