This article empirically analyzes the domestic and external inflation determinants for eight non-eurozone new EU member states (NMS), using a structural vector autoregression model. Results indicate that foreign shocks are a major factor in explaining inflation dynamics in the medium run, while the short-run inflation dynamics are mainly influenced by domestic shocks. Moreover, the importance of the foreign inflation component has had a rising trend in the precrisis period in all NMS and mostly coincided with their accession to the EU. This trend ended with the onset of the global financial crisis. The study implicates the need to augment the classical Taylor rule with foreign factors in the case of small open economies.

This paper examines the evolution of labour market uncertainty after the irruption of the COVID-19 pandemic in European countries. Since uncertainty is not directly observable, we use two alternative methods to directly approximate it. Both approaches are based on qualitative expectations elicited form the consumer survey conducted by the European Commission. On the one hand, following (Dibiasi and Iselin in Empir Econ 61:2113–2141, 2021), we use the share of consumers unable to formalise expectations about unemployment (Knightian-type uncertainty). On the other, we use the geometric discrepancy indicator proposed by (Claveria in Empirica 48:483–505, 2021) to quantify the proportion of disagreement in business and consumer expectations. We find that both uncertainty measures covary across the 22 European countries analysed. Although we observe differences in the evolution across countries, in most cases the perception of labour market uncertainty peaked before the outbreak of the crisis, plummeted during the first months of the lockdown, and started rising again. When testing for cointegration with the unemployment rate, we find that both indicators exhibit a long-term relationship with unemployment in most countries. The impact of both indicators on unemployment is characterised by considerable asymmetries, showing a more intense reaction to decreases in the level of labour market uncertainty. While this finding may seem counterintuitive at first sight, it somehow reflects the fact that during recessive periods, the level of disagreement in consumer unemployment expectations drops considerably.