Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/107768
Authors: 
Topal, Pinar
Year of Publication: 
2015
Series/Report no.: 
SAFE Working Paper Series 90
Abstract: 
This paper investigates whether a fiscal stimulus implies a different impact for flexible and rigid labour markets. The analysis is done for 11 advanced OECD economies. Using quarterly data from 1999 to 2013, I estimate a panel threshold structural VAR model in which regime switches are determined by OECD's employment protection legislation index. My empirical results indicate significant differences between rigid and flexible labour markets regarding the impact of the fiscal stimulus on output and unemployment. While the impulse response of real GDP to a government spending shock is positive and more effective in flexible labour markets, it has less impact in the rigid ones. Moreover, it is found that a fiscal stimulus leads to higher overall unemployment in highly regulated countries.
Subjects: 
fiscal policy
labour economics
labour market policies
panel VAR
non-linear VAR
impulse response analysis
JEL: 
E62
H30
J01
J08
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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