As the uncertainty relating to the sovereign debt crisis in some Euro Area Member States continued over the last two years, the extent and potential consequences of the spillovers between euro area Member States' economic, financial and budgetary situations has become increasingly evident.
Assessing the implications of wage developments for the build-up and correction of macroeconomic imbalances is a key analytical foundation of In Depth Reviews (IDRs). Such an assessment has to determine whether growth in labour costs is compatible with orderly developments in price competitiveness or with standard responses to economic fundamentals. This paper presents two benchmarks to this end: the first is based on wage growth consistent with constant price competitiveness; the second assumes that wage growth is consistent with changes in economic fundamentals (changes in labour productivity, unemployment and inflation).
|ISBN 978-92-79-29238-5 (online)|
Occasional Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and cover a wide spectrum of subjects. Views expressed in unofficial documents do not necessarily reflect the official views of the European Commission.