Slovakia: A Catching Up Euro Area Member In and Out of the Crisis

Jarko Fidrmuc, Caroline Klein (), Robert Price and Andreas Wörgötter ()
Additional contact information
Caroline Klein: OECD
Robert Price: affiliation not available

No 55, IZA Policy Papers from Institute of Labor Economics (IZA)

Abstract: The Slovak economy experienced a strong but short recession in 2009. The recovery afterwards was driven by exports and investment. While GDP growth was one of the strongest in OECD, employment did not reach the pre-crisis level and unemployment remains stubbornly high. This paper argues that Slovakia joined the euro area after a period of unprecedented real appreciation, which generated a threat for competitiveness of its export-oriented manufacturing industry. The response combined internal devaluation with productivity increasing measures, including capital deepening and laying off low productivity workers. While this strategy was successfully restoring an external equilibrium, its consequences for domestic demand and employment are less positive. This development is compared with Estonia and Slovenia, two other small and very open economies, recently entering the euro area.

Keywords: domestic demand; job-less recovery; crisis; Slovenia; Estonia; Slovak Republic (search for similar items in EconPapers)
JEL-codes: E20 F41 G01 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2013-03
New Economics Papers: this item is included in nep-eec, nep-mac and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Working Paper: Slovakia: A Catching Up Euro Area Member In and Out of the Crisis (2013)
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