Labor Market Reforms and Current Account Imbalances - Beggar-thy-Neighbor Policies in a Currency Union?

Timo Baas and Ansgar Belke

No 505, Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen

Abstract: Member countries of the European Monetary Union (EMU) initiated wideranging labor market reforms in the last decade. This process is ongoing as countries that are faced with serious labor market imbalances perceive reforms as the fastest way to restore competitiveness within a currency union. This fosters fears among observers about a beggar-thy-neighbor policy that leaves non-reforming countries with a loss in competitiveness and an increase in foreign debt. Using a two-country, two-sector search and matching DSGE model, we analyze the impact of labor market reforms on the transmission of macroeconomic shocks in both, non-reforming and reforming countries. By analyzing the impact of reforms on foreign debt, we contribute to the debate on whether labor market reforms increase or reduce current account imbalances.

Keywords: current account deficit; labor market reforms; DSGE models; search and matching labor market (search for similar items in EconPapers)
JEL-codes: E24 E32 F32 J64 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-dge, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/103330/1/797372857.pdf (application/pdf)

Related works:
Working Paper: Labor market reforms and current account imbalances - beggar-thy-neighbor policies in a currency union? (2015)
Working Paper: Labour Market Reforms and Current Account Imbalances: Beggar-thy-neighbour policies in a currency union? (2014)
Working Paper: Labor Market Reforms and Current Account Imbalances: Beggar-Thy-Neighbor Policies in a Currency Union? (2014)
Working Paper: Labor Market Reforms and Current Account Imbalances – Beggar-thy-neighbor Policies in a Currency Union? (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:rwirep:505

DOI: 10.4419/86788579

Access Statistics for this paper

More papers in Ruhr Economic Papers from RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().