Exchange Rate Volatility and Employment Growth: Empirical Evidence from the CEE Economies

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Exchange Rate Volatility and Employment Growth: Empirical Evidence from the CEE Economies

Author Info

Belke, Ansgar () (University of Hohenheim and IZA Bonn)
Setzer, Ralph (University of Hohenheim)

Additional information is available for the following registered author(s):

Ansgar Belke

Abstract

According to the traditional 'optimum currency area' approach, not much will be lost from a very hard peg to a currency union if there has been little reason for variations in the exchange rate. This paper takes a different approach and highlights the fact that high exchange rate volatility may as well signal high costs for labor markets. The impact of exchange rate volatility on labor markets in the CEECs is analyzed, finding that volatility visà- vis the euro significantly lowers employment growth. Hence, the elimination of exchange rate volatility could be considered as a substitute for a removal of employment protection legislation.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1038.

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Length: 36 pages
Date of creation: Mar 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1038

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Paper
- Ansgar Belke & Ralph Setzer, 2003. "Exchange Rate Volatility and Employment Growth: Empirical Evidence from the CEE Economies," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]

Find related papers by JEL classification:
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Private Pensions
P27 - Economic Systems - - Socialist Systems and Transition Economies - - - Performance and Prospects

This paper has been announced in the following NEP Reports:

NEP-ALL-2004-03-22 (All new papers)
NEP-DEV-2004-03-22 (Development)
NEP-FIN-2004-03-22 (Finance)
NEP-IFN-2004-03-22 (International Finance)
NEP-RMG-2004-03-22 (Risk Management)

References listed on IDEAS
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Gunther Schnabl & Christina Ziegler, 2008. "Exchange Rate Regime and Wage Determination in Central and Eastern Europe," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]

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