ABSTRACT
The timing and the intensity of the impact of external shocks on different developing economies has been varied, and there has also been a diversity of experiences in the ability of the different economies to adjust to the new circumstances. On the whole the Asian countries were relatively more successful in adjusting to the adverse external shocks, and they achieved some of the highest rates of growth in the world economy during these two decades. Countries in Africa, the Middle East, and Latin America on the other hand faced considerable difficulties in adjusting their economies to the new external circumstances with a significant slowdown in their growth performance in this period. The relative success of Asian countries was by and large due to their ability to achieve fast rates of manufacturing export growth during this period of economic instability and slowdown in the international economy (see Karshenas 1998). The relationship between real exchange rates, manufacturing competitiveness and export performance, therefore, furnishes the entry point in this chapter into the analysis of the role of labor markets, and more specifically wage flexibility, in global economic adjustments.
