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

Author

Listed:
  • Antonis Adam
  • Panos Hatzipanayotou

    (Athens University of Economics and Business)

  • Thomas Moutos

    (DIEES, AUEB)

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.

Suggested Citation

  • Antonis Adam & Panos Hatzipanayotou & Thomas Moutos, 2015. "Labour Market Regulation, Fiscal Consolidation, and the Success of Current Account Adjustments," DEOS Working Papers 1517, Athens University of Economics and Business.
    • Handle: RePEc:aue:wpaper:1517
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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