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

Author

Listed:
  • 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)

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.

Suggested Citation

  • Vladimir Gligorov & Anna Iara & Michael Landesmann & Robert Stehrer & Hermine Vidovic, 2008. "Western Balkan Countries: Adjustment Capacity to External Shocks, with a Focus on Labour Markets," wiiw Research Reports 352, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:rpaper:rr:352
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    References listed on IDEAS

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    Cited by:

    1. Sofia Gouveia, 2014. "Business cycle correlation between the Euro area and the Balkan countries," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Eastern Macedonia and Thrace Institute of Technology (EMATTECH), Kavala, Greece, vol. 7(1), pages 33-49, April.
    2. repec:ces:eeagre:v::y:2016:i::p:01-140 is not listed on IDEAS
    3. Torben M. Andersen & Giuseppe Bertola & John Driffill & Harold James & Hans-Werner Sinn & Jan-Egbert Sturm & Branko Uroševic, 2016. "Chapter 5: Western Balkans: Coming Together," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 99-123, February.

    More about this item

    Keywords

    Western Balkans; optimum currency area; labour market flexibility; external disequilibria; wage-setting;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • 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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