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Real exchange rates, dollarization and industrial employment in Latin America

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Author Info

  • Arturo Galindo

    ()
    (Universidad de los Andes)

  • Alejandro Izquierdo

    ()
    (Inter-American Development Bank (IDB))

  • José M. Montero

    ()
    (Banco de España)

Abstract

We use a panel dataset on industrial employment and trade for 9 Latin American countries for which liability dollarization data at the industrial level is available. We test whether real exchange rate fluctuations have a significant impact on employment, and analyze whether the impact varies with the degree of trade openness and liability dollarization. Econometric evidence supports the view that real exchange rate depreciations can impact employment growth positively, but this effect is reversed as liability dollarization increases. In industries with high liability dollarization, the overall impact of a real exchange rate depreciation can be negative.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/06/Fic/dt0601e.pdf
File Function: First version, January 2006
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0601.

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Length: 32 pages
Date of creation: Jan 2006
Date of revision:
Handle: RePEc:bde:wpaper:0601

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Keywords: manufacturing employment; real exchange rates; debt composition; balance sheet effects;

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