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Employment and exchange rates: the role of openness and technology

  • Fernando Alexandre

    ()

    (University of Minho and NIPE)

  • Pedro Bação

    ()

    (University of Coimbra and GEMF)

  • João Cerejeira

    ()

    (University of Minho and NIPE)

  • Miguel Portela

    ()

    (University of Minho, NIPE and IZA)

Real exchange rate movements are important drivers of the reallocation of resources between sectors of the economy. Economic theory suggests that the impact of exchange rates should vary with the degree of exposure to international competition and with the technology level. This paper contributes by bringing together these two views, both theoretically and empirically. We show that both the degree of openness and the technology level mediate the impact of exchange rate movements on labour market developments. According to our estimations, whereas employment in high-technology sectors seems to be relatively immune to changes in real exchange rates, these appear to have sizable and significant effects on highly open low-technology sectors. The analysis of job flows suggests that the impact of exchange rates on these sectors occurs through employment destruction.

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File URL: http://gemf.fe.uc.pt/workingpapers/pdf/2009/gemf_2009-08.pdf
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Paper provided by GEMF - Faculdade de Economia, Universidade de Coimbra in its series GEMF Working Papers with number 2009-08.

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Length: 48 pages
Date of creation: Jun 2009
Date of revision:
Publication status: Published in Open Economies Review 22(5): 969-984, 2011.
Handle: RePEc:gmf:wpaper:2009-08
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  1. Fernando Alexandre & Pedro Bação & João Cerejeira & Miguel Portela, 2011. "Employment and Exchange Rates: The Role of Openness and Technology," Open Economies Review, Springer, vol. 22(5), pages 969-984, November.
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