The name is absent



Aggregate Wage Flexibility in Selected New EU Member States 15

For the rest of the sample the estimates of wage flexibility are not significantly different from
zero9.

Figure 4: Time-Varying Estimates of Real Wage Flexibility, 1995-2004

CE-4


ERM-II
Estonia


EMU-3

Austria



-.4*....................................

96  97  98  99  00  01   02  03  04


Greece


1.0

-1.5-

-2.0-1..................................

96   97   98   99   00   01   02   03   04


Poland                            Lithuania                           Portugal


.3


-.1-

-.2-

-.3.

.1 -

.0-




-.4-/

-.5-l..............................

97   98   99    00   01    02   03    04


Note: Kalman filter estimates of C2,t in eq. (4). Two standard error bands are plotted.

Negative and significant values of C2,t mean wage flexibility.

9 Belke and Setzer (2004) find that exchange rate volatility has a significant negative impact on employment
growth in Central and Eastern European countries, thus contributing to growth in unemployment. In what
follows, euro adoption, by eliminating exchange rate risk, can be viewed as a sort of active labor market policy, a
substitute for the removal of employment protection legislation.



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