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Fiscal Shocks And Real Wages

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Executive Summary

The author estimates the short-run dynamic effect of fiscal shocks on real wages for a panel of euro area countries. The main findings are in line with the Neo-Keynesian predictions that real wages increase in response to spending shocks. However, the scale of the wage response depends on the type of government spending. This paper studies the dynamic effects of positive shocks to different measures of government spending on real wages using a panel of euro area members.

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