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- Title
Current Accounts and Coordination of Wage Bargaining.
- Authors
Nieminen, Mika; Heimonen, Kari; Tohmo, Timo
- Abstract
This study provides novel evidence on the impact of labor market institutions on current account dynamics. Our results suggest that a high degree of coordination of wage bargaining has a positive effect on the current account balance over the long run. This result is not driven entirely by wage moderation induced by centralized wage setting. We also provide robust evidence that a high degree of coordination of wage bargaining is associated with a slower current account adjustment toward its long-run equilibrium. This result seems theoretically plausible; the aggregate shocks in the exporting sector are largely driven by idiosyncratic shocks and the presence of idiosyncratic shocks increases the importance of labor market flexibility. Overall, our analysis of the impact of labor market institutions on current account dynamics complements the existing empirical current account literature focused on macroeconomic and financial measures.
- Subjects
WAGE bargaining; BALANCE of payments; LABOR market; IDIOSYNCRATIC risk (Securities); MACROECONOMICS
- Publication
Open Economies Review, 2019, Vol 30, Issue 2, p319
- ISSN
0923-7992
- Publication type
Article
- DOI
10.1007/s11079-018-9511-2