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Western Balkan Countries: Adjustment Capacity to External Shocks, with a Focus on Labour Markets

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Author Info
Michael Landesmann () (The Vienna Institute for International Economic Studies, wiiw)
Hermine Vidovic () (The Vienna Institute for International Economic Studies, wiiw)
Vladimir Gligorov () (The Vienna Institute for International Economic Studies, wiiw)
Robert Stehrer () (The Vienna Institute for International Economic Studies, wiiw)
Anna Iara () (The Vienna Institute for International Economic Studies, wiiw)

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Abstract

The main question addressed in this study is the performance of the labour markets in the Western Balkans. The aim is to find out whether they can deliver growth of employment and decline of unemployment in the medium run and whether they can withstand short-term shocks due to changes in demand or supply. These questions are particularly pressing in view of the monetary policy based on fixed exchange rates which is followed by the majority of the countries in this region. In terms of the theory of optimal currency areas, if the exchange rate is fixed, labour markets have to be flexible if there are adverse shocks. Otherwise, adjustment would work through a fall in employment levels and an increase in unemployment. The alternative of flexible exchange rates has been abandoned by most monetary authorities in the region for fears of risk of an exchange rate crisis.

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Publisher Info
Paper provided by The Vienna Institute for International Economic Studies, wiiw in its series Research Reports with number 352.

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Length: 136 pages including 35 Tables and 40 Figures
Date of creation: Dec 2008
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Publication status: Published as wiiw Research Report
Handle: RePEc:wii:rpaper:rr:352

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Related research
Keywords: Western Balkans; optimum currency area; labour market flexibility; external disequilibria; wage-setting;

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
F15 - International Economics - - Trade - - - Economic Integration
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
J4 - Labor and Demographic Economics - - Particular Labor Markets
D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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References listed on IDEAS
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