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Exchange Rate, Employment and Hours: What Firm-Level Data Say

Author

Listed:
  • Francesco Nucci

    (Universit… di Roma "La Sapienza")

  • Alberto Franco Pozzolo

    (University of Molise, Centro Studi Luca d'Agliano)

Abstract

Using a representative panel of manufacturing firms, we estimate the response of job and hours worked to currency swings, showing that it depends primarily on the firm's exposure to foreign sales and its reliance on imported inputs. Further, we show that, for given international;orientation, the response to exchange rate ;fluctuations is magnified when firms exhibit a lower monopoly power and when they face foreign pressure in the domestic market through import penetration. The degree of substitutability between imported and other inputs and the distribution of workers by type introduce additional degrees of specilcity in the employment sensitivity;to exchange rate swings. Further, wage adjustments are also shown to provide a channel through which firms react to currency shocks. Finally, gross job ;ows within the firm are found to depend;on exchange rate fluctuations, although the effect on job creation is predominant.

Suggested Citation

  • Francesco Nucci & Alberto Franco Pozzolo, 2009. "Exchange Rate, Employment and Hours: What Firm-Level Data Say," Mo.Fi.R. Working Papers 12, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  • Handle: RePEc:anc:wmofir:12
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    References listed on IDEAS

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    More about this item

    Keywords

    Employment; Exchange rate; Firm's foreign exposure;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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