Exchange Rates and Economic Growth During the Global Business Cycle: The Role of Labor Market Institutions
Vytautas Kuokštis,
Muhammad Asali and
Simonas Algirdas Spurga
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Vytautas Kuokštis: Vilnius University
Simonas Algirdas Spurga: Vilnius University
No 17590, IZA Discussion Papers from Institute of Labor Economics (IZA)
Abstract:
The effect of exchange rate regimes on economic performance is one of the key questions in international economics, both academically and policy-wise. Based on the theory of Optimum Currency Areas (OCA), we examine how labor market regulations affect the relationship between exchange rate regimes and economic growth during global recessions and recoveries. Using a global panel dataset, we show that the negative influence of fixed exchange rate regimes during global shocks identified in earlier literature only manifests itself in countries with high labor market regulation. Conversely, fixers with less labor market regulation recover faster from global recessions than floaters.
Keywords: growth; labor market regulation; exchange rate regimes; global recessions; recovery (search for similar items in EconPapers)
JEL-codes: G01 G18 J08 O24 P17 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2024-12
New Economics Papers: this item is included in nep-opm
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