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Labour Market Regulation, Fiscal Consolidation, and the Success of Current Account Adjustments

Antonis Adam (), Panos Hatzipanayotou () and Thomas Moutos ()

No 1517, DEOS Working Papers from Athens University of Economics and Business

Abstract: In this paper we argue that the strictness of labour market regulations can interact with the mode of fiscal consolidation (tax- based versus spending-based fiscal adjustments) to affect whether current account adjustments are successful. Using data from 81 countries, we are able to identify 147 episodes of current account adjustments, of which 69 are classified as successful. On the basis of a discrete choice cross- sectional time- series model we find that the co-existence of tax-based fiscal consolidations and strict labour market regulations reduces significantly the probability of successful current account adjustments.

Keywords: Current account adjustment; labour market regulations; fiscal consolidation (search for similar items in EconPapers)
JEL-codes: E62 F32 F41 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc and nep-mac
Date: 2015-10-29
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