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Exchange Rate Uncertainty and Labour Market Adjustment under Fixed and Flexible Exchange Rates

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  • Yu-Fu Chen

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  • Michael Funke

    ()

Abstract

The 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 of 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 emploment adjustment thresholds.

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Bibliographic Info

Paper provided by Hamburg University, Department of Economics in its series Quantitative Macroeconomics Working Papers with number 20202.

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Date of creation: Mar 2002
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Handle: RePEc:ham:qmwops:20202

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Keywords: Real Option Theory; Uncertainty; Working Time; Employment; Labour Demand; Exchange Rates;

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References

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Cited by:
  1. Broll, Udo & Hansen, Sabine, 2004. "Labour Demand and Exchange Rate Volatility," Center for European, Governance and Economic Development Research Discussion Papers 28, University of Goettingen, Department of Economics.
  2. Broll, Udo & Hansen, Sabine, 2004. "Labour Demand and Exchange Rate Volatility," Center for European, Governance and Economic Development Research Discussion Papers 28, University of Goettingen, Department of Economics.
  3. Udo Broll & Sabine Hansen-Averlant, 2010. "Exchange rate volatility, international trade and labour demand," International Economics and Economic Policy, Springer, vol. 7(4), pages 423-436, December.

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