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

  • Vladimir Gligorov

    ()

    (The Vienna Institute for International Economic Studies, wiiw)

  • Anna Iara
  • Michael Landesmann

    ()

    (The Vienna Institute for International Economic Studies, wiiw)

  • Robert Stehrer

    ()

    (The Vienna Institute for International Economic Studies, wiiw)

  • Hermine Vidovic

    ()

    (The Vienna Institute for International Economic Studies, wiiw)

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

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