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The Effect of Real Exchange Rate Changes on Labour Productivity Growth

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  • Murphy, Gavin
  • Siedschlag, Iulia

Abstract

We examine the effect of changes in international competitiveness on labour productivity growth through three channels: (i) export, (ii) import, and (iii) import competition. Using micro data from the Irish manufacturing over the period 1995-2002, we account for firms' heterogeneity in their exposure to international competitive pressure. Our econometric estimates indicate that a real exchange rate appreciation had a negative effect on labour productivity growth once a firm's export exposure was greater than 14 per cent. When a firm's import exposure exceeded 33 per cent, a real exchange rate appreciation had a positive effect on labour productivity. An increase in import competition due to a real exchange rate appreciation had no effect on a firm's labour productivity growth.

Suggested Citation

  • Murphy, Gavin & Siedschlag, Iulia, 2012. "The Effect of Real Exchange Rate Changes on Labour Productivity Growth," Papers WP439, Economic and Social Research Institute (ESRI).
  • Handle: RePEc:esr:wpaper:wp439
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    Keywords

    exchange/growth/Productivity/competitiveness/competition/data/manufacturing;

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