Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/104786
Authors: 
Baas, Timo
Belke, Ansgar
Year of Publication: 
2014
Series/Report no.: 
ROME Discussion Paper Series 14-07
Abstract: 
Member countries of the European Monetary Union (EMU) initiated wide-ranging 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.
Subjects: 
current account deficit
labor market reforms
DSGE models
search and matching labor market
JEL: 
E24
E32
J64
F32
Document Type: 
Working Paper

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