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How labor market institutions influence the relationship between exchange rate regimes and economic growth

Year: 2025

Type: article

Abstract: How do exchange rate regimes affect economic growth? Although this topic has attracted considerable empirical attention, a definitive answer remains elusive. This study aims to advance our understanding by examining how labor market flexibility affects the link between exchange rate regimes and growth. Using a panel of 194 countries from 1970 to 2019, we find that in developing economies, fixed exchange rate regimes hinder growth when labor markets are highly rigid but boost growth when labor markets are highly flexible. We also demonstrate that this relationship varies depending on which labor market flexibility indicator is used, reflecting the differences in each measure's geographic and temporal coverage.

Source: PLoS ONE

DOI: 10.1371/journal.pone.0332492

Authors: Vytautas Kuokštis, Muhammad Asali, Simonas Algirdas Spurga

Institutions: Vilnius University, College of Management Academic Studies

Language: English

Topic: Monetary Policy and Economic Impact

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: gold

Estimated APC paid: $2,382