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Exchange Rates and Economic Growth During the Global Business Cycle: The Role of Labor Market Institutions

Author

Listed:
  • Kuokštis, Vytautas

    (Vilnius University)

  • Asali, Muhammad

    (College of Management Academic Studies)

  • Spurga, Simonas Algirdas

    (Vilnius University)

Abstract

The effect of exchange rate regimes on economic performance is one of the key questions in international economics, both academically and policy-wise. Based on the theory of Optimum Currency Areas (OCA), we examine how labor market regulations affect the relationship between exchange rate regimes and economic growth during global recessions and recoveries. Using a global panel dataset, we show that the negative influence of fixed exchange rate regimes during global shocks identified in earlier literature only manifests itself in countries with high labor market regulation. Conversely, fixers with less labor market regulation recover faster from global recessions than floaters.

Suggested Citation

  • Kuokštis, Vytautas & Asali, Muhammad & Spurga, Simonas Algirdas, 2024. "Exchange Rates and Economic Growth During the Global Business Cycle: The Role of Labor Market Institutions," IZA Discussion Papers 17590, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17590
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    growth; labor market regulation; exchange rate regimes; global recessions; recovery;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • P17 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Performance and Prospects

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