Exchange Rate Uncertainty and Labour Market Adjustment under Fixed and Flexible Exchange Rates
AbstractThe standard literature on working time has modelled the decisions of firms in a deterministic framework in which firms can choose between employment and overtime (given mandated standard hours). Contrary to this approach, we follow the real options approach, which allows us to investigate the value to a firm of waiting to adjust labour when the firm‘s revenues in domestic currency are stochastic and adjustment costs are sunk. The simulations reject the null hypothesis that all exchange rate regimes obey common employment adjustment thresholds.
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Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 779.
Date of creation: 2002
Date of revision:
real option theory; uncertainty; working time; employment; labour demand; exchange rates.;
Other versions of this item:
- Chen, Yu-Fu & Funke, Michael, 2002. "Exchange rate uncertainty and labour market adjustment under fixed and flexible exchange rates," HWWA Discussion Papers 196, Hamburg Institute of International Economics (HWWA).
- Michael Funke & Yu-Fu Chen, 2004. "Exchange rate uncertainty and labour market adjustment under fixed and flexible exchange rates," Money Macro and Finance (MMF) Research Group Conference 2003 33, Money Macro and Finance Research Group.
- Yu-Fu Chen & Michael Funke, 2002. "Exchange Rate Uncertainty and Labour Market Adjustment under Fixed and Flexible Exchange Rates," Quantitative Macroeconomics Working Papers 20202, Hamburg University, Department of Economics.
- D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- F31 - International Economics - - International Finance - - - Foreign Exchange
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
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