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

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Author Info

  • 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

(This abstract was borrowed from another version of this item.)

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File URL: http://hdl.handle.net/10.1007/s10663-004-0886-5
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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:empiri:v:31:y:2004:i:2:p:247-280

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Web page: http://www.springerlink.com/link.asp?id=100261

Related research

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

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Cited by:
  1. repec:eid:wpaper:01/11 is not listed on IDEAS
  2. Feldmann, Horst, 2011. "The unemployment effect of exchange rate volatility in industrial countries," Economics Letters, Elsevier, vol. 111(3), pages 268-271, June.
  3. Demir, Firat, 2010. "Exchange Rate Volatility and Employment Growth in Developing Countries: Evidence from Turkey," MPRA Paper 24477, University Library of Munich, Germany.
  4. Brito, Márcio Holland de & Vieira, Flávio Vilela & Silva, Cleomar Gomes da & Bottecchia, Luiz Carlos, 2011. "Growth and exchange rate volatility: a panel data analysis," Textos para discussão 296, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  5. Gunther Schnabl & Christina Ziegler, 2008. "Exchange Rate Regime and Wage Determination in Central and Eastern Europe," CESifo Working Paper Series 2471, CESifo Group Munich.

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