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Exchange Rate Movements and Employment Growth: An OCA Assessment of the CEE Economies

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  • Ansgar Belke
  • Leo Kaas

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 in the past. This paper takes a different approach and highlights the fact that high exchange rate volatility may also signal high costs for labor markets. The impact of exchange rate volatility on labor markets in the CEECs is analyzed, revealing that volatility vis-à-vis the euro significantly lowers employment growth. Hence, eliminating exchange rate volatility could be considered a substitute for removing employment protection legislation. Copyright Kluwer Academic Publishers 2004

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Bibliographic Info

Article provided by Springer in its journal Empirica.

Volume (Year): 31 (2004)
Issue (Month): 2 (June)
Pages: 247-280

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Handle: RePEc:kap:ecopln:v:31:y:2004:i:2:p:247-280

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Web page: http://www.springerlink.com/link.asp?id=113294

Related research

Keywords: Central and Eastern Europe; currency union; euroization; exchange rate variability; job creation;

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Cited by:
  1. Gunther Schnabl & Christina Ziegler, 2008. "Exchange Rate Regime and Wage Determination in Central and Eastern Europe," CESifo Working Paper Series 2471, CESifo Group Munich.
  2. Gilles Saint-Paul, 2009. "Le dollar, l’innovation et l’emploi," Revue d'Économie Financière, Programme National Persée, vol. 94(1), pages 107-115.
  3. Demir, Firat, 2010. "Exchange Rate Volatility and Employment Growth in Developing Countries: Evidence from Turkey," World Development, Elsevier, vol. 38(8), pages 1127-1140, August.
  4. Feldmann, Horst, 2011. "The Unemployment Effect of Exchange Rate Volatility in Industrial Countries," Department of Economics Working Papers 24073, University of Bath, Department of Economics.
  5. Aderbal Oliveira Damasceno & Flávio Vilela Vieir, 2014. "Desalinhamento Cambial, Volatilidade Cambial E Crescimento Econômico: Uma Análise Para A Economia Brasileira (1995-2011)," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41th Brazilian Economics Meeting] 100, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  6. F. V. Vieira & M. Holland & C. Gomes da Silva & L. C. Bottecchia, 2013. "Growth and exchange rate volatility: a panel data analysis," Applied Economics, Taylor & Francis Journals, vol. 45(26), pages 3733-3741, September.
  7. Ansgar Belke & Bernhard Herz & Lukas Vogel, 2006. "Beyond Trade – Is Reform Effort Affected by the Exchange Rate Regime? A Panel Analysis for the World versus OECD Countries," Economie Internationale, CEPII research center, issue 107, pages 29-58.
  8. repec:eid:wpaper:01/11 is not listed on IDEAS

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