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The Effects of Public Debt on Labor Demand in the United States

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  • Garcia-Jimenez, Carlos I.
  • Mishra, Ashok K.

Abstract

The relationship between appreciation of the exchange rate and employment is investigated in the period 1980-2008 for the United States. Previous literature has found a negative relationship, studying as channels of transmission the role of exports, substitution of factors of production, terms of trade, openness, and productivity. This study endeavors to shed some light on the role of government debt on determining the level of employment through the exchange rate. The mechanism of transmission is defined. The model is derived from a standard Cobb Douglas production function having government debt affecting the growth of productivity. Exchange rate appreciations and increasing public debt were found to be detrimental to employment.

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Bibliographic Info

Paper provided by Southern Agricultural Economics Association in its series 2010 Annual Meeting, February 6-9, 2010, Orlando, Florida with number 56361.

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Date of creation: 06 Feb 2010
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Handle: RePEc:ags:saea10:56361

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Keywords: Unemployment rate; government; budget deficit; exchange rate; trade deficit; FDI; Financial Economics; International Development; Labor and Human Capital; Political Economy; Public Economics; F31; J01; E24; E62;

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  1. Raimundo Soto, 2008. "Unemployment and Real Exchange Rate Dynamics in Latin American Economies," Documentos de Trabajo 337, Instituto de Economia. Pontificia Universidad Católica de Chile..
  2. Sven W. Arndt, 2006. "Regional Currency Arrangements in North America," Working Papers 40, Bank of Greece.
  3. Lastrapes, William D. & Koray, Faik, 1990. "Exchange rate volatility and U.S. multilateral trade flows," Journal of Macroeconomics, Elsevier, vol. 12(3), pages 341-362.
  4. Francesco Nucci & Alberto Franco Pozzolo, 2009. "Exchange Rate, Employment and Hours: What Firm-Level Data Say," Mo.Fi.R. Working Papers 12, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  5. Michael W. Klein & Scott Schuh & Robert K. Triest, 2000. "Job Creation, Job Destruction, and the Real Exchange Rate," NBER Working Papers 7466, National Bureau of Economic Research, Inc.
  6. Carlos Vargas-Silva, 2009. "The Tale of Three Amigos: Remittances, Exchange Rates, and Money Demand in Mexico," Review of Development Economics, Wiley Blackwell, vol. 13(1), pages 1-14, 02.
  7. Koray, Faik & Lastrapes, William D, 1989. "Real Exchange Rate Volatility and U.S. Bilateral Trade: A VAR Approach," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 708-12, November.
  8. Robert A. Blecker, 2007. "The Economic Consequences of Dollar Appreciation for US Manufacturing Investment: A Time-Series Analysis," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(4), pages 491-517.
  9. Stewart Ngandu, 2008. "Exchange Rates And Employment," South African Journal of Economics, Economic Society of South Africa, vol. 76(s2), pages S205-S221, 08.
  10. Frenkel, Roberto & Ros, Jaime, 2006. "Unemployment and the real exchange rate in Latin America," World Development, Elsevier, vol. 34(4), pages 631-646, April.
  11. Xiaolan Fu & V. N. Balasubramanyam, 2005. "Exports, Foreign Direct Investment and Employment: The Case of China," The World Economy, Wiley Blackwell, vol. 28(4), pages 607-625, 04.
  12. Greenaway, David & Hine, Robert C. & Wright, Peter, 1999. "An empirical assessment of the impact of trade on employment in the United Kingdom," European Journal of Political Economy, Elsevier, vol. 15(3), pages 485-500, September.
  13. Zhenhui Xu, 2008. "China's Exchange Rate Policy and Its Trade Balance with the US," Review of Development Economics, Wiley Blackwell, vol. 12(4), pages 714-727, November.
  14. Nguyen Thanh Xuan & Yuqing Xing, 2008. "Foreign direct investment and exports," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 16(2), pages 183-197, 04.
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