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Compensating wages under different exchange rate regimes

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  • Hoffmann, Mathias
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    Abstract

    This paper analyses the interconnectedness between developing countries' domestic wage levels and their exchange rate choices. The theoretical model illustrates that differences in domestic wage levels are related to countries' exchange rate regimes. In particular, the level of domestic wages increases with the rigidity of the exchange rate regime. The empirical model explores the determinants of the domestic wage level in a cross-section of 38 developing countries. In line with the theoretical model, the economies under review experience a rise in the domestic wage level with an increase in the rigidity of their exchange rate regime. --

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    Bibliographic Info

    Paper provided by University of Cologne, Centre for Financial Research (CFR) in its series CFR Working Papers with number 05-04.

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    Date of creation: 2005
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    Handle: RePEc:zbw:cfrwps:0504

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    Related research

    Keywords: Exchange Rate Regimes; Factor Prices; Monetary Policy; Uncertainty;

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