Slovakia: A Catching Up Euro Area Member In and Out of the Crisis
AbstractThe 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.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Policy Papers with number 55.
Length: 24 pages
Date of creation: Mar 2013
Date of revision:
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Other versions of this item:
- Jarko Fidrmuc & Caroline Klein & Robert W.R. Price & Andreas Wörgötter, 2013. "Slovakia: A Catching Up Euro Area Member In and Out of the Crisis," OECD Economics Department Working Papers 1019, OECD Publishing.
- E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- G01 - Financial Economics - - General - - - Financial Crises
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-16 (All new papers)
- NEP-EEC-2013-03-16 (European Economics)
- NEP-MAC-2013-03-16 (Macroeconomics)
- NEP-TRA-2013-03-16 (Transition Economics)
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