Mika Nieminen (University of Jyväskylä): Coordination of wage bargaining and current accounts

Mika Nieminen (University of Jyväskylä): Coordination of wage bargaining and current accounts

Abstract

We provide novel evidence on the impacts of coordination of wage bargaining on current account dynamics. Our results suggest that a high degree of coordination of wage bargaining has a positive effect on current account balance and a negative effect on the speed of current account adjustment. These results are new as the current account literature has largely neglected the role of labor market institutions and the literature on the determinants of the rate of current account reversion has been limited to examining the role of exchange rate regimes. According to the widely used ICTWSS database, China has a high degree of coordination of wage-setting although the wage bargaining (or "consultation") usually takes place at the firm level.

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