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

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  • Belke, Ansgar

    ()
    (University of Duisburg-Essen)

  • Setzer, Ralph

    ()
    (University of Hohenheim)

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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Bibliographic Info

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:
Publication status: published in: Economic and Social Review, 2003, 34 (3), 267-292
Handle: RePEc:iza:izadps:dp1038

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Keywords: exchange rate variability; euroization; currency union; Central and Eastern Europe; job creation;

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References

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Cited by:
  1. Schnabl, Gunther & Ziegler, Christina, 2011. "Exchange rate and wage policies in Central and Eastern Europe," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 347-360, May.
  2. Evžen Kočenda & Mathilde Maurel & Gunther Schnabl, 2013. "Short- and Long-term Growth Effects of Exchange Rate Adjustment," Review of International Economics, Wiley Blackwell, vol. 21(1), pages 137-150, 02.
  3. Eliane Cristina de Araújo, 2011. "Volatilidade Cambial e Crescimento Econômico: Teorias e Evidências para Economias em Desenvolvimento e Emergentes (1980 e 2007)," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 12(2), pages 187_213.
  4. Schweickert, Rainer & Thiele, Rainer, 2004. "From Washington to post-Washington? Consensus policies and divergent developments in Latin America and Asia," Kiel Discussion Papers 408, Kiel Institute for the World Economy (IfW).
  5. Gunther Schnabl & Christina Ziegler, 2008. "Exchange Rate Regime and Wage Determination in Central and Eastern Europe," CESifo Working Paper Series 2471, CESifo Group Munich.

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