Vahagn Galstyan

Working Papers
Exchange Rates
Central Bank of Ireland
New Wapping Street
North Wall Quay
Dublin 1

Working Papers

  • Quarter-Casting Euro Area Wage Growth, (with Pawel Adrjan and Reamonn Lydon) February 2024.

    Abstract: This paper presents a methodology for ‘quarter-casting’ wage growth, leveraging real-time data from the Indeed Wage Tracker (IWT) to address the critical need for timely wage growth information. Our approach, focusing on the euro area, overcomes the limitations of delayed wage data by analysing high-frequency online job postings, offering early insights into wage trends. The study demonstrates that our optimised weighting approach to mapping IWT at the occupational category level to average wage growth at the aggregate level achieves superior in-sample accuracy across various euro area countries. This research not only bridges a significant gap in economic forecasting but also sets a precedent for employing online job market data for early wage growth analysis, enhancing real-time economic decision-making.

  • Understanding the Joint Dynamics of Inflation and Wage Growth in the Euro Area, December 2023.

    Abstract: This paper presents an empirical framework and analysis of the interactions among inflation, wages, employment, and output in the euro area. Results identify price shocks and demand shocks as the primary exogenous factors explaining historical variance. The wage gap emerges as a key determinant of wage dynamics in the aftermath of a price shock. In contrast, the output gap becomes dominant following demand shocks. The real wage gap acts as a corrective mechanism, ensuring that prices and wages in particular align with the broader economic landscape. Forecasts for the period starting 2023Q3 emphasise the enduring significance of the real wage gap, projecting its ongoing impact on nominal wages in tight labour markets. As for inflation expectations, the estimates emphasise their stickiness. In this context, the significant and persistent price shock that has occurred suggests a gradual decline in expectations, potentially leading to an extended period of elevated inflation.

  • How Persistent are International Capital Flows?, January 2009.

    Abstract: This paper documents the dynamic properties of the current account, trade balance and international capital flows. For this purpose, two approaches are taken: probit and a nonparametric estimation. The probabilistic approach shows that, in general, deficits and net inflows tend to be more persistent than surpluses and net outflows. This result is robust to either specification of pooled and country-specific probits. The results of non-parametric estimation are in line with the results obtained from the probit.

  • Optimal Policy and the Sectoral Composition of Output in a New Keynesian Model, (with Michael Wycherley), March 2012.

    Abstract: This paper analyses optimal policy on the basis that the economy comprises a number of different sectors. It shows that the composition of output matters, that policy should take into account the source of shocks as well as their aggregate magnitude, and that policy tools impacting individual sectors can be significantly welfare improving. If sectoral policy is not adopted, then commitment in tax policy is important in similar ways and for similar reasons to commitment in monetary policy. With sectoral policy, commitment for tax and monetary policies ceases to be important.

  • Terms of Trade in the Medium-run, October 2011.

    Abstract: This paper contributes to empirical research on the dynamics of the terms of trade. We start by proposing a method for constructing different measures of the terms of trade. This is achieved by estimating a range of substitution elasticities using a panel data approach and highly disaggregated data on trade flows. Next, various measures of the terms of trade and trade margins are related to productivity and demand proxies. We find that domestic demand side movements are positively related to the terms of trade, while domestic productivity gains result in a deterioration of the terms of trade. Our results suggest that higher relative productivity raises the real component of exports relative to imports along the intensive margin inducing a weakening of the terms of trade.