Floating Exchange Rates as Employment Protection
Floating exchange rates allow central banks to respond to aggregate demand fluctuations by changing their interest rates. However, such fluctuations create inertia in the labour market by increasing the cost of hiring and firing workers. A regime of flexible exchange rates can cause rigidities in labour markets similar to those caused by legalised firing restrictions. Exchange rate volatility makes firms wait before hiring new workers and firing existing ones. Thus the adoption of a common currency has effects very similar to the removal of employment-protection legislation and other direct restrictions on hiring and firing. Exchange-rate volatility is more harmful for the entry of new firms than employment-protection legislation, particularly promising, high-risk ventures.
|Date of creation:||Sep 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +45 6550 2233
Fax: +45 6550 1090
Web page: http://degit.sam.sdu.dk/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cukierman, Alex & Lippi, Francesco, 1999.
"Central bank independence, centralization of wage bargaining, inflation and unemployment:: Theory and some evidence,"
European Economic Review,
Elsevier, vol. 43(7), pages 1395-1434, June.
- Cukierman, A. & Lippi, F., 1998. "Central Bank Independence, Centralization of Wage Bargaining, Inflation and Unemployment - Theory and Some Evidence," Discussion Paper 1998-116, Tilburg University, Center for Economic Research.
- André Sapir & Marco Buti, 1998. "Economic policy in EMU," ULB Institutional Repository 2013/8078, ULB -- Universite Libre de Bruxelles.
- Ansgar Belke & Bernhard Herz & Lukas Vogel, 2007. "Reforms, Exchange Rates and Monetary Commitment: A Panel Analysis for OECD Countries," Open Economies Review, Springer, vol. 18(3), pages 369-388, July.
- Chen, Yu-Fu & Snower, Dennis J. & Zoega, Gylfi, 2002.
"Labour Market Institutions and Macroeconomic Shocks,"
CEPR Discussion Papers
3480, C.E.P.R. Discussion Papers.
- Yu-Fu Chen & Dennis Snower & Gylfi Zoega, 2003. "Labour-market Institutions and Macroeconomic Shocks," LABOUR, CEIS, vol. 17(2), pages 247-270, 06.
- Yu-Fu Chen & Dennis Snower & Gylfi Zoega, 2001. "Labour Market Institutions and Macroeconomic Shocks," Dundee Discussion Papers in Economics 123, Economic Studies, University of Dundee.
- Chen, Yu-Fu & Snower, Dennis J. & Zoega, Gylfi, 2002. "Labour-Market Institutions and Macroeconomic Shocks," IZA Discussion Papers 539, Institute for the Study of Labor (IZA).
- Bentolila, Samuel & Saint-Paul, Gilles, 1991. "The Macroeconomic Impact of Flexible Labour Contracts: An Application to Spain," CEPR Discussion Papers 596, C.E.P.R. Discussion Papers.
- Yu-Fu Chen & Gylfi Zoega, . "On The Effectiveness Of Firing Costs," Dundee Discussion Papers in Economics 087, Economic Studies, University of Dundee.
- ElÅ¼bieta Bednarek-Sekunda & Richard Jong-A-Pin & Jakob de Haan, 2010. "The European Economic and Monetary Union and Labour Market Reform," European Union Politics, , vol. 11(1), pages 3-27, March.
When requesting a correction, please mention this item's handle: RePEc:deg:conpap:c016_038. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jan Pedersen)
If references are entirely missing, you can add them using this form.