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Employment and exchange rates: the role of openness and technology

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Author Info

  • Fernando Alexandre

    ()
    (University of Minho and NIPE)

  • Pedro Bação

    ()
    (University of Coimbra and GEMF)

  • João Cerejeira

    ()
    (University of Minho and NIPE)

  • Miguel Portela

    ()
    (University of Minho, NIPE and IZA)

Abstract

Real exchange rate movements are important drivers of the reallocation of resources between sectors of the economy. Economic theory suggests that the impact of exchange rates should vary with the degree of exposure to international competition and with the technology level. This paper contributes by bringing together these two views, both theoretically and empirically. We show that both the degree of openness and the technology level mediate the impact of exchange rate movements on labour market developments. According to our estimations, whereas employment in high-technology sectors seems to be relatively immune to changes in real exchange rates, these appear to have sizable and significant effects on highly open low-technology sectors. The analysis of job flows suggests that the impact of exchange rates on these sectors occurs through employment destruction.

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Bibliographic Info

Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2009-08.

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Length: 48 pages
Date of creation: Jun 2009
Date of revision:
Publication status: Published in Open Economies Review 22(5): 969-984, 2011.
Handle: RePEc:gmf:wpaper:2009-08

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Keywords: exchange rates; international trade; job flows.;

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References

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  1. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2009. "Aggregate and sector-specific exchange rate indexes for the Portuguese economy," NIPE Working Papers 13/2009, NIPE - Universidade do Minho.
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  3. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2009. "Employment and Exchange rates: the Role of Openness and Technology," GEE Papers 0015, Gabinete de Estratégia e Estudos, Ministério da Economia e da Inovação, revised May 2009.
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Citations

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Cited by:
  1. Ligia Alba melo B. & Carlos Adrés Ballesteros R, 2012. "Creación, destrucción y reasignación del empleo en el sector manufacturero colombiano," Borradores de Economia 699, Banco de la Republica de Colombia.
  2. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2010. "Employment, exchange rates and labour market rigidity," NIPE Working Papers 2/2010, NIPE - Universidade do Minho.
  3. Nicolas Berman & Thierry Mayer & Philippe Martin, 2009. "How do different exporters react to exchange rate changes? Theory, empirics and aggregate implications," Sciences Po publications 7493, Sciences Po.
  4. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2009. "Employment and exchange rates: the role of openness and technology," NIPE Working Papers 16/2009, NIPE - Universidade do Minho.
  5. Julian P. Christ & Patricia Hofmann, 2010. "International Openness and Patent Activity: First Descriptive Results Very preliminary draft," DEGIT Conference Papers c015_055, DEGIT, Dynamics, Economic Growth, and International Trade.
  6. Pedro Bação & António Portugal Duarte, 2010. "Accession to the European Union, Interest Rates and Indebtedness: Greece and Portugal," GEMF Working Papers 2011-04, GEMF - Faculdade de Economia, Universidade de Coimbra.
  7. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2010. "Manufacturing employment and exchange rates in the Portuguese economy: the role of openness, technology and labour market rigidity," GEMF Working Papers 2010-23, GEMF - Faculdade de Economia, Universidade de Coimbra.

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