Bank of Lithuania
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Working Paper Series

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Working papers disseminate economic research relevant not only to the tasks and functions of the Bank of Lithuania and of the European System of Central Banks but also appealing more broadly to the academic community in economics and finance. They present, discuss and analyse the results of original and academically rigorous theoretical and/or empirical research. Working papers constitute the basis for publications in leading academic journals, making contributions to the existing literature in the fields of economics and finance. They encourage collaboration between the researchers of the Bank of Lithuania and other central banks, Lithuanian and foreign universities and research institutes.

Papers are only available in English.

No 122

Household Spending Dynamics: The Impact of House Price-Rent Spread and Credit Constraints

  • Abstract

    This paper explores how fluctuations in the house price-rent spread influence household spending, taking into account credit constraints. We incorporate a housing spread shock, representing changes in the future value of residential property, into a model of household decisionmaking with borrowing frictions. Using halfcentury data from 28 OECD countries, we find that housing spread shocks are more persistent than credit shocks, which induce ‘boom-bust’ dynamics. We also identify asymmetries once the joint effect of shocks to housing spread and borrowing frictions is analyzed, particularly in crisis periods, underscoring the importance of policies addressing credit conditions and household expectations to stabilize the economy when traditional tools are less effective.

    Keywords: household expectations; house price-rent spread; credit frictions; interest rates; household consumption

    JEL classification: D15, E21, E5, G51

No 121

Striking a Bargain: Narrative Identification of Wage Bargaining Shocks

  • Abstract

    We quantify wage bargaining shocks’ effects on macroeconomic aggregates in Germany using a structural vector auto-regression model. We identify exogenous variation in bargaining power from episodes of minimum wage introduction and industrial disputes. This disciplines the impulse responses of unemployment and output, and sharpens inference on the behaviour of other variables, which is consistent with theoretical predictions from search and matching models. We find that wage bargaining shocks are an important contributor to agregate fluctuations in unemployment and inflation, exhibit close to full passthrough to consumer prices, and imply plausible dynamics for the vacancy rate, firms’ profits, and the labor share.

    Keywords: Wage bargaining, minimum wage, industrial action, narrative restrictions, structural vector autoregression.

    JEL classification: J2, J3, E32, C32.

No 120

Women’s Voice at Work and Family-Friendly Firms

  • Abstract

    Uneven family responsibilities are at the root of gender gaps. Using a new dataset  covering all firm-level agreements signed in Spain between 2010 and 2018, we explore whether the presence of female worker representatives can facilitate the negotiation of family-friendly policies with management. We compare firms that operate under the same set of labor regulations but differ in the presence of women among employee representatives. Our findings suggest that having female representatives at the bargaining table can help transform workplaces to better meet women’s needs and ultimately close the gender gap.

    Keywords: women representation, bargaining, family-friendly firms

    JEL codes: J16, J32, J53

No 119

The transmission of trade shocks across countries: firm-level evidence from the Covid-19 crisis

  • Abstract

    This paper studies the margins and heterogeneity of adjustments to trade shocks by estimating how Covid-19 restrictions affected imports and exports. We use data from Lithuania, Latvia and Estonia on foreign trade at the level of the firm and the partner country and at monthly frequency from January 2019 to December 2020. The focus is on the short-term adjustment and on the first wave of the pandemic. We find that the adjustment to the restrictions mostly occurs through the intensive margin, meaning trade values are reduced rather than trade in certain markets or products ceasing. It is further observed that quantity played a more important role in the adjustment process than prices and that both upstream and downstream restrictions played an equally important role in the decline of foreign trade. It is shown that differentiated products that are difficult to replace are responsible for this adjustment pattern.

    Keywords: transmission of shocks, input-output linkages, global value chains, Covid-19, workplace closing.

    JEL codes: F14, F61, D22