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Exchange Rate Volatility and Employment Growth: Empirical Evidence from the CEE Economies

Author

Listed:
  • Belke, Ansgar H.

    (University of Duisburg-Essen)

  • Setzer, Ralph

    (University of Hohenheim)

Abstract
According to the traditional 'optimum currency area' approach, not much will be lost from a very hard peg to a currency union if there has been little reason for variations in the exchange rate. This paper takes a different approach and highlights the fact that high exchange rate volatility may as well signal high costs for labor markets. The impact of exchange rate volatility on labor markets in the CEECs is analyzed, finding that volatility visà- vis the euro significantly lowers employment growth. Hence, the elimination of exchange rate volatility could be considered as a substitute for a removal of employment protection legislation.

Suggested Citation

  • Belke, Ansgar H. & Setzer, Ralph, 2004. "Exchange Rate Volatility and Employment Growth: Empirical Evidence from the CEE Economies," IZA Discussion Papers 1038, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1038
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    Cited by:

    1. Eliane Cristina de Araújo, 2011. "Volatilidade Cambial e Crescimento Econômico: Teorias e Evidências para Economias em Desenvolvimento e Emergentes (1980 e 2007)," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 12(2), pages 187-213.
    2. Schnabl, Gunther & Ziegler, Christina, 2011. "Exchange rate and wage policies in Central and Eastern Europe," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 347-360, May.
    3. Evžen Kočenda & Mathilde Maurel & Gunther Schnabl, 2013. "Short- and Long-term Growth Effects of Exchange Rate Adjustment," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 137-150, February.
    4. Gunther Schnabl & Christina Ziegler, 2008. "Exchange Rate Regime and Wage Determination in Central and Eastern Europe," CESifo Working Paper Series 2471, CESifo.
    5. Mourad Zmami & Ousama Ben-Salha, 2015. "Exchange rate movements and manufacturing employment in Tunisia: Do different categories of firms react similarly?," Economic Change and Restructuring, Springer, vol. 48(2), pages 137-167, May.
    6. Schweickert, Rainer & Thiele, Rainer, 2004. "From Washington to post-Washington? Consensus policies and divergent developments in Latin America and Asia," Kiel Discussion Papers 408, Kiel Institute for the World Economy (IfW Kiel).
    7. Victor Shevchuk & Roman Kopych, 2021. "Exchange Rate Volatility, Currency Misalignment, and Risk of Recession in the Central and Eastern European Countries," Risks, MDPI, vol. 9(5), pages 1-19, May.
    8. Gilles Saint-Paul, 2009. "Le dollar, l’innovation et l’emploi," Revue d'Économie Financière, Programme National Persée, vol. 94(1), pages 107-115.
    9. Shu-Chen Chang & Chung-Hua Shen, 2011. "The effect of exchange-rate uncertainty on unemployment in three developing Asian countries: evidence from bivariate GARCH approach," Applied Economics Letters, Taylor & Francis Journals, vol. 18(8), pages 783-788.
    10. Goodness C. Aye & Laurence Harris, 2019. "The effect of real exchange rate volatility on income distribution in South Africa," WIDER Working Paper Series wp-2019-29, World Institute for Development Economic Research (UNU-WIDER).
    11. Hussaini Umaru & Aguda Niyi A. & Nordiana Osagie Davies, 2018. "The Effects of Exchange Rate Volatility on Economic Growth of West African English-Speaking Countries," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(4), pages 131-143, October.
    12. Martins Iyoboyi & Olarinde Muftau, 2014. "Impact of exchange rate depreciation on the balance of payments: Empirical evidence from Nigeria," Cogent Economics & Finance, Taylor & Francis Journals, vol. 2(1), pages 1-23, December.

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    More about this item

    Keywords

    exchange rate variability; euroization; currency union; Central and Eastern Europe; job creation;
    All these keywords.

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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