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How Did Exchange Rates Affect Employment in US Cities?

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  • Huang, Haifang

    ()
    (University of Alberta, Department of Economics)

  • Tang, Yao

    ()
    (Bowdoin College)

Abstract

We estimate the effects of real exchange rate movements on employment in US cities between 2003 and 2010. We explore the differences in the composition of local industries to construct city-specific changes in exchange rates and estimate their effects on local employment in manufacturing industries and in nonmanufacturing industries. Controlling for year and city fixed effects, we find that a depreciation of the US dollar increased local employment in the manufacturing industries, our proxy for the tradable sector. The depreciation also increased employment in the nonmanufacturing industries, the nontradable sector. Furthermore, the effects on nonmanufacturing employment were stronger in cities that had a higher fraction of manufacturing employment, indicating the exchange rate movements’ indirect effects through the manufacturing industries. We also consider an alternative definition of the tradable sector that is broadened to include five service industries. The findings are similar.

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Bibliographic Info

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2013-7.

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Length: 41 pages
Date of creation: 01 May 2013
Date of revision:
Handle: RePEc:ris:albaec:2013_007

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Keywords: exchange rate; employment; US cities;

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  1. Caroline M. Betts & Timothy J. Kehoe, 2004. "U.S. real exchange rate fluctuations and relative price fluctuations," Staff Report 334, Federal Reserve Bank of Minneapolis.
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  10. Revenga, Ana L, 1992. "Exporting Jobs? The Impact of Import Competition on Employment and Wages in U.S. Manufacturing," The Quarterly Journal of Economics, MIT Press, vol. 107(1), pages 255-84, February.
  11. John Y. Campbell & Richard H. Clarida, 1987. "The Dollar and Real Interest Rates," NBER Working Papers 2151, National Bureau of Economic Research, Inc.
  12. Huizinga, John, 1987. "An empirical investigation of the long-run behavior of real exchange rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 27(1), pages 149-214, January.
  13. Robert C. Johnson, 2012. "Trade in Intermediate Inputs and Business Cycle Comovement," NBER Working Papers 18240, National Bureau of Economic Research, Inc.
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