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Employment and exchange rates: the role of openness and technology

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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 internacional competition and with the technology level. This paper contributes by bringing together these two views, both theoretically and empirically. We show the 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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Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 16/2009.

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Date of creation: 2009
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Handle: RePEc:nip:nipewp:16/2009

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Postal: Núcleo de Investigação em Políticas Económicas, Escola de Economia e Gestão, Universidade do Minho, P-4710-057 Braga, Portugal
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Web page: http://www3.eeg.uminho.pt/economia/nipe/versao_inglesa/index_uk.htm
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Keywords: exchange rates; international trade; employment destruction.;

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References

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  1. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2009. "Aggregate and sector-specific exchange rate indexes for the Portuguese economy," Notas Económicas, Faculdade de Economia, Universidade de Coimbra, issue 30, pages 6-28, December.
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Citations

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Cited by:
  1. Alexandre, Fernando & Bação, Pedro & Cerejeira, João & Portela, Miguel, 2009. "Employment and Exchange Rates: The Role of Openness and Technology," IZA Discussion Papers 4191, Institute for the Study of Labor (IZA).
  2. Nicolas Berman & Thierry Mayer & Philippe Martin, 2009. "How do different exporters react to exchange rate changes? Theory, empirics and aggregate implications," Sciences Po publications 7493, Sciences Po.
  3. Ligia Alba Melo & Carlos Andrés Ballesteros, 2013. "Creación, destrucción y reasignación del empleo en el sector manufacturero colombiano," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 15(28), pages 281-311, January-J.
  4. Julian P. Christ & Patricia Hofmann, 2010. "International Openness and Patent Activity: First Descriptive Results Very preliminary draft," DEGIT Conference Papers c015_055, DEGIT, Dynamics, Economic Growth, and International Trade.
  5. Alexandre, Fernando & Bação, Pedro & Cerejeira, João & Portela, Miguel, 2010. "Manufacturing Employment and Exchange Rates in the Portuguese Economy: The Role of Openness, Technology and Labour Market Rigidity," IZA Discussion Papers 5251, Institute for the Study of Labor (IZA).
  6. Pedro Bação & António Portugal Duarte, 2010. "Accession to the European Union, Interest Rates and Indebtedness: Greece and Portugal," GEMF Working Papers 2011-04, GEMF - Faculdade de Economia, Universidade de Coimbra.
  7. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2010. "Employment, exchange rates and labour market rigidity," GEMF Working Papers 2010-03, GEMF - Faculdade de Economia, Universidade de Coimbra.

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