In this paper, we estimate the speed of adjustment for firm level data. We introduce an extrinsic limitation to the model to test the impact on rate of adjustment. We find that extrinsic limitations have a significant impact on speed of adjustment

The 2010 European debt crisis has revived the discussion concerning the optimum adjustment strategy in the face of asymmetric shocks. Whereas Mundell's (1961) seminal theory on optimum currency areas suggests depreciation in the face of crisis, the most recent emergence of competitive...