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Competitiveness, labor market institutions, and monetary policy

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  • Ester Faia

    (Johann Wolfgang Goethe University, Germany)

Abstract

In the presence of rigid prices, movements in the exchange rate help to absorb external shocks and to reduce changes in net exports. However, they also affect firms’ competitiveness, marginal costs, and labor demand. In countries where labor market institutions hinder wage adjustment (for example due to high union density or more rigid collective bargaining agreements), firms are less competitive: labor demand is then more sensitive to external shocks, increasing the risk of unemployment.

Suggested Citation

  • Ester Faia, 2017. "Competitiveness, labor market institutions, and monetary policy," IZA World of Labor, Institute of Labor Economics (IZA), pages 383-383, August.
    • Handle: RePEc:iza:izawol:journl:y:2017:n:383
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    competitiveness; wage adjustment; labor market institutions; real exchange rate; monetary policy;
    All these keywords.

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor

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