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Exchange rate uncertainty and employment: an algorithm describing ‘play’

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  • Ansgar Belke
  • Matthias Göcke

Abstract

The paper deals with the impacts of exchange rate uncertainty on the relationship between macroeconomic labour market variables. Under uncertainty, areas of weak reactions—so‐called ‘play’ areas—have to be considered at the macrolevel. The width of the play area is a positive function of the degree of uncertainty. When changes go beyond the play‐area suddenly strong reactions (‘spurts’) occur. These non‐linear dynamics are captured in a simplified linearized way. An algorithm describing linear play hysteresis is developed and implemented into a regression framework. As an empirical application, the exchange rate impacts on German employment are analysed considering play effects. Copyright © 2001 John Wiley & Sons, Ltd.

Suggested Citation

  • Ansgar Belke & Matthias Göcke, 2001. "Exchange rate uncertainty and employment: an algorithm describing ‘play’," Applied Stochastic Models in Business and Industry, John Wiley & Sons, vol. 17(2), pages 181-204, April.
    • Handle: RePEc:wly:apsmbi:v:17:y:2001:i:2:p:181-204
    DOI: 10.1002/asmb.436
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    Cited by:

    1. Ansgar Belke & Matthias Göcke & Martin Günther, 2009. "When Does It Hurt?: The Exchange Rate "Pain Threshold" for German Exports," Discussion Papers of DIW Berlin 943, DIW Berlin, German Institute for Economic Research.
    2. Belke, Ansgar & Frenzel Baudisch, Coletta & Göcke, Matthias, 2020. "Interest rate bands of inaction and play-hysteresis in domestic investment – Evidence for the Euro Area," Journal of Economic Behavior & Organization, Elsevier, vol. 175(C), pages 19-39.
    3. Ansgar Belke & Matthias Göcke, 2005. "Real Options Effects on Employment: Does Exchange Rate Uncertainty Matter for Aggregation?," German Economic Review, Verein für Socialpolitik, vol. 6(2), pages 185-203, May.
    4. Svetlana Fedoseeva & Laura M. Werner, 2016. "How linear is pricing-to-market? Empirical assessment of hysteresis and asymmetry of PTM," Empirical Economics, Springer, vol. 50(3), pages 1065-1090, May.
    5. Ansgar Belke, 2002. "EU Enlargement, Exchange Rate Variability and Labor Market Performance," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 213/2002, Department of Economics, University of Hohenheim, Germany.
    6. Svetlana Fedoseeva & Laura M. Werner, 2014. "Asymmetry and Hysteresis: Two Perspectives on Pricing-to-Market Nonlinearity," Working Papers 2014.02, International Network for Economic Research - INFER.
    7. Ansgar Belke & Ralph Setzer, 2003. "Exchange Rate Variability and Labor Market Performance in the Visegrád Countries," Economic Change and Restructuring, Springer, vol. 36(2), pages 153-175, June.
    8. Hans Christian Kongsted, 2012. "Trade policy dynamics, entry costs, and exchange rate uncertainty," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(2), pages 197-216, December.
    9. Belke, Ansgar & Kronen, Dominik, 2017. "Exchange rate bands of inaction and hysteresis in EU exports to the global economy: The role of uncertainty," Ruhr Economic Papers 695, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    10. BELKE Ansgar & SETZER Ralph, 2010. "The Costs of Exchange Rate Volatility for Labor Markets: Some Empirical Evidence from the CEE Economies," EcoMod2003 330700012, EcoMod.

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