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Exchange Rate Variability and Labor Market Performance in the Visegrád Countries

  • Ansgar Belke
  • Ralph Setzer

According to the traditional ‘optimum currency area’ approach, not much will be lost from a very hard peg to a currency union if there has been little reason for variations in the exchange rate. This paper takes a different approach and highlights the fact that high exchange rate volatility may as well signal high costs for labor markets. Based on the paper by Belke (2003), the impact of exchange rate volatility on labor markets in the four Visegrád Economies (Czech Republic, Hungary, Poland, and the Slovak Republic) is analyzed, finding that volatility vis-à-vis the euro significantly increases unemployment. Hence, the elimination of exchange rate volatility could be considered as a substitute for a removal of employment protection legislation. Copyright Kluwer Academic Publishers 2003

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Article provided by Springer in its journal Economics of Planning.

Volume (Year): 36 (2003)
Issue (Month): 2 (June)
Pages: 153-175

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Handle: RePEc:kap:ecopln:v:36:y:2003:i:2:p:153-175
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  1. Dimitri Boreiko, 2002. "EMU and Accession Countries: Fuzzy Cluster Analysis of Membership," Working Papers 71, Oesterreichische Nationalbank (Austrian Central Bank).
  2. Carmen M. Reinhart & Vincent R. Reinhart, 2001. "What Hurts Most? G-3 Exchange Rate or Interest Rate Volatility," NBER Working Papers 8535, National Bureau of Economic Research, Inc.
  3. Peeters, Marga, 1997. "Does demand and price uncertainty affect Belgian and Spanish corporate investment?," MPRA Paper 23604, University Library of Munich, Germany.
  4. Babetskii, Ian & Boone, Laurence & Maurel, Mathilde, 2002. "Exchange Rate Regimes and Supply Shocks Asymmetry: The Case of the Accession Countries," CEPR Discussion Papers 3408, C.E.P.R. Discussion Papers.
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  8. Neumeyer, P.A., 1995. "Currencies and the Allocation of Risk: The Welfare Effect of a Monetary Union," DELTA Working Papers 95-27, DELTA (Ecole normale supérieure).
  9. Ansgar Belke & Daniel Gros, 2001. "Real Impacts of Intra-European Exchange Rate Variability: A Case for EMU?," Open Economies Review, Springer, vol. 12(3), pages 231-264, July.
  10. Ansgar Belke & Rainer Fehn, 2000. "Institutions and Structural Unemployment: Do Capital Market Imperfections Matter?," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 190/2000, Department of Economics, University of Hohenheim, Germany.
  11. Arellano, M., 1989. "A Note On The Anderson-Hsiao Estimator For Panel Data," Economics Series Working Papers 9975, University of Oxford, Department of Economics.
  12. Andrew K. Rose, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," NBER Working Papers 7432, National Bureau of Economic Research, Inc.
  13. Dixit, A., 1988. "Entry And Exit Decisions Under Uncertainty," Papers 91, Princeton, Department of Economics - Financial Research Center.
  14. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
  15. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
  16. Belke, Ansgar & Gros, Daniel, 2002. "Monetary integration in the Southern Cone," The North American Journal of Economics and Finance, Elsevier, vol. 13(3), pages 323-349, December.
  17. Ansgar Belke & Leo Kaas, 2002. "The Impact of Exchange Rate Volatility on Labor Markets: Europe versus United States," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 201/2002, Department of Economics, University of Hohenheim, Germany.
  18. Christian Fahrholz, 2003. "Strategic Exchange-Rate Policy of Accession Countries in ERM II," Eastward Enlargement of the Euro-zone Working Papers wp14, Free University Berlin, Jean Monnet Centre of Excellence, revised 01 Apr 2003.
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