Over the last few years significant spreads arose for both public and private debt between euro area countries. We check whether these spreads could be made to work towards the goal of providing more stability to the euro area. In particular we focus on reducing the imbalances that arose between the core and peripheral members of the euro area in the first decade of its existence. The idea is that stable, positive spreads in peripheral countries could have decreased domestic demand thus preventing the boombust cycles that plagued these economies. They could also prevent such developments in the future. We find that real interest rates higher by 1.5 to 5.8 percentage points would have been necessary to stabilize the four peripheral euro area member countries.

Resumen Se investiga si la incidencia del empleo temporal en países de la Unión Económica y Monetaria europea explica las divergencias en las dinámicas del desempleo. Con datos de 11 países de la zona del euro para 1995–2013 y regresiones de panel, los autores encuentran un efecto robusto y significativo de la dualidad laboral –coexistencia de contratos temporales y permanentes– en el desempleo: la primera intensifica la reacción del segundo a las fluctuaciones del producto, aunque disminuye su duración, lo cual genera más problemas de divergencia en una unión monetaria. Una armonización coordinada mediante la introducción del ≪contrato único≫ aumentaría la estabilidad tanto nacional como de la eurozona.

This article investigates whether the varying prevalence of temporary employment contracts across Economic and Monetary Union (EMU) countries can explain their different unemployment dynamics. Using a database of labour market institutions, dynamic panel regressions are carried out for 11 eurozone countries for 1995-2013. Labour market duality -i.e. the co-existence of permanent and temporary contracts -is found to have a robust and significant effect on unemployment dynamics: a high duality rate increases the response of unemployment to output shocks while decreasing its persistence. The authors suggest that introducing a "single contract" could improve stability at both eurozone and country level.

Résumé Les auteurs examinent l'influence de l'emploi temporaire sur le chômage au sein de l'Union économique et monétaire (UEM). Ils effectuent pour cela une analyse par régression dynamique en panel qui porte sur onze pays (1995–2013) et repose sur des indicateurs des institutions du marché du travail. Celle‐ci fait apparaître un effet robuste et significatif du travail temporaire sur la dynamique du chômage, qui réagit de façon plus intense mais moins persistante aux chocs sur la production en cas de dualisme prononcé. Les auteurs proposent d'évoluer vers un système de contrat unique pour renforcer la stabilité à l'échelon des pays et de la zone euro.

We would like to thank Stephen Bond and Christian Merkl, as well as participants of the above conferences for useful comments and suggestions. The views in this paper are those of the authors and do not necessarily reflect the views of Narodowy Bank Polski.