Essays in empirical macroeconomics

This dissertation consists of three essays in empirical macroeconomics. The first two essays study wage and price dynamics across sectors in the euro area. The third essay examines the relation between risk sharing and monetary policy transmission in the euro area . How can disaggregated information shed light on the wage Phillips curve? The first chapter assesses the question using sectoral data for euro area countries over the past two decades. Using a sector-specific measure of unemployment rate for euro area countries and a shift-share instrument, I show that the slope of the wage Phillips curve is relatively steep in the euro area. The estimation of the wage Phillips curves for each individual sector reveals significant heterogeneity across sectors in the sensitivity of wage growth to unemployment. A deeper analysis suggests an important role for skills. In particular, the slope of the wage Phillips curve is flatter in the low-skilled sectors and steeper in the high-skilled sectors. The second chapter studies the pass-through from wages to producer prices using sectoral disaggregated data for the euro area. We find a positive and statistically significant wage-price pass-through, which varies across sectors. The wage-price pass-through in private services is significantly higher than in industry and takes longer before reaching its peak. While a higher labour intensity is a key component of the pass-through, our estimates indicate that differences in sectoral labour shares alone cannot explain the larger wage-price pass-through in private services compared to industry. Instead, the estimates hint at an important role for international competition in the domestic market for the tradeable sector. They also suggest that the sales destination matters: wage growth contributes to domestic inflation for goods but not to export inflation. The third chapter explores the relation between risk sharing and monetary policy in the euro area using regionally disaggregated data on economic activity. We show that risk sharing plays a key role in shaping the real effects of monetary policy. With weak risk sharing, monetary policy shocks trigger a strong and durable response in output. With strong risk sharing, the response is attenuated, and output reverts to its initial level over the medium term. The attenuating impact of risk sharing via credit and factor markets concentrates over a two-year horizon, whereas fiscal risk sharing operates over longer horizons. Fiscal risk sharing especially benefits poorer regions by shielding them against persistent output contractions after tightening shocks.