How Do Labor Markets of Central European Small Open Economies Perform? Measuring the Nairu using Bayesian Approach

Abstract :

Small open economies of the Central European region, namely the Czech Republic, Hungary and Slovakia, have historically experienced very similar development, not only from the economic point of view. Thanks to their close economic cooperation and integration efforts in the Visegrad Group, and after 2004 also in the European Union, they experience the same economic conditions, share the same single market for labor, goods, services and capital, and most importantly, face more or less the same external disturbances. As a result, one would believe that response of their labor markets to these disturbances has to be roughly the same. In this contribution we will take a closer look on the recent labor markets developments of the countries mentioned above. For this purpose, estimates of non-accelerating inflation rate of unemployment (NAIRU) are presented and dynamics of the estimated trajectories before and after the onset of The Great Financial Crisis in 2008 is analyzed.