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Employment and Exchange Rates: The Role of Openness and Technology

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Author Info
Alexandre, Fernando () (University of Minho)
Bação, Pedro () (University of Coimbra)
Cerejeira, João () (University of Minho)
Portela, Miguel () (University of Minho)

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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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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4191.

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Length: 42 pages
Date of creation: May 2009
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Handle: RePEc:iza:izadps:dp4191

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Related research
Keywords: exchange rates; international trade; job flows;

Other versions of this item:

Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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References listed on IDEAS
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.:
  1. Corsetti, Giancarlo & Dedola, Luca, 2005. "A macroeconomic model of international price discrimination," Journal of International Economics, Elsevier, vol. 67(1), pages 129-155, September. [Downloadable!] (restricted)
  2. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2009. "Aggregate and sector-specific exchange rate indexes for the Portuguese economy," GEMF Working Papers 2009-05, GEMF - Faculdade de Economia, Universidade de Coimbra. [Downloadable!]
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  3. John Haltiwanger & Stefano Scarpetta & Helena Schweiger, 2006. "Assessing Job Flows across Countries: The Role of Industry, Firm Size and Regulations," IZA Discussion Papers 2450, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Linda S. Goldberg, 2004. "Industry-specific exchange rates for the United States," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 1-16. [Downloadable!]
  5. Amador, João & Cabral, Sónia & Ramos Maria, José, 2007. "International Trade Patterns over the Last Four Decades: How does Portugal Compare with other Cohesion Countries?," MPRA Paper 5996, University Library of Munich, Germany. [Downloadable!]
  6. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August. [Downloadable!] (restricted)
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  7. Pierre-Olivier Gourinchas, 1998. "Exchange Rates and Jobs: What Do We Learn from Job Flows?," NBER Working Papers 6864, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Burgess, Simon M & Knetter, Michael M, 1998. "An International Comparison of Employment Adjustment to Exchange Rate Fluctuations," Review of International Economics, Blackwell Publishing, vol. 6(1), pages 151-63, February.
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  9. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November. [Downloadable!] (restricted)
    Other versions:
  10. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932.
  11. Jose Manuel Campa & Linda S. Goldberg, 2001. "Employment Versus Wage Adjustment And The U.S. Dollar," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 477-489, August. [Downloadable!] (restricted)
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  12. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375. [Downloadable!] (restricted)
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  14. Stephen Machin & John Van Reenen, 1998. "Technology And Changes In Skill Structure: Evidence From Seven Oecd Countries," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1215-1244, November. [Downloadable!] (restricted)
    Other versions:
  15. Linda Goldberg & Joseph Tracy & Stephanie Aaronson, 1999. "Exchange Rates and Employment Instability: Evidence from Matched CPS Data," American Economic Review, American Economic Association, vol. 89(2), pages 204-210, May. [Downloadable!] (restricted)
  16. Bound, John & Johnson, George, 1992. "Changes in the Structure of Wages in the 1980's: An Evaluation of Alternative Explanations," American Economic Review, American Economic Association, vol. 82(3), pages 371-92, June. [Downloadable!] (restricted)
  17. Michael W. Klein & Scott Schuh & Robert K. Triest, 1999. "Job creation, job destruction, and the real exchange rate," Working Papers 99-11, Federal Reserve Bank of Boston. [Downloadable!]
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  18. Ekholm, Karolina & Moxnes, Andreas & Ulltveit-Moe, Karen-Helene, 2008. "Manufacturing restructuring and the role of Real exchange rate shocks: A firm level analysis," CEPR Discussion Papers 6904, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  19. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Survival of the best fit: Exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants," Journal of International Economics, Elsevier, vol. 68(1), pages 219-237, January. [Downloadable!] (restricted)
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