Currency fluctuations provide a substantial source of movements in relative prices that is largely exogenous to the firm. This paper evaluates empirically and theoretically the importance of exchange rate movements on job reallocation across and within sectors. The objective is (1) to provide accurate estimates of the impact of exchange rate fluctuations and (2) to further our understanding of how reallocative shocks propagate through the economy. The empirical results indicate that exchange rates have a significant effect of gross and net job flows in the traded goods sector. Moreover, the paper finds that job creation and destruction comove positively, following a real exchange rate shock. Appreciations are associated with additional turbulence, and depreciations with a existing non-representative agent reallocation models have a hard time replicating the salient features of the data. The results indicate a strong tension between the positive comovements of gross flows in response to reallocative disturbances and the negative comovement in response to aggregate shocks.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
6864.
Length: Date of creation: Dec 1998 Date of revision: Publication status: published relationship to a non-chapter. This should not happen. Please contact NBER. Handle: RePEc:nbr:nberwo:6864
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Find related papers by JEL classification: E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
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