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Exchange Rate Uncertainty and Labour Market Adjustment under Fixed and Flexible Exchange Rates

Author

Listed:
  • Yu-Fu Chen

  • Michael Funke

Abstract

The standard literature on working time has modelled the decisions of firms in a deterministic framework in which firms can choose between employment and overtime (given mandated standard hours). Contrary to this approach, we follow the real options approach, which allows us to investigate the value of a firm of waiting to adjust labour when the firm´s revenues in domestic currency are stochastic and adjustment costs are sunk. The simulations reject the null hypothesis that all exchange rate regimes obey common emploment adjustment thresholds.

Suggested Citation

  • Yu-Fu Chen & Michael Funke, 2002. "Exchange Rate Uncertainty and Labour Market Adjustment under Fixed and Flexible Exchange Rates," Quantitative Macroeconomics Working Papers 20202, Hamburg University, Department of Economics.
    • Handle: RePEc:ham:qmwops:20202
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    File URL: http://gulliver.econ.uni-hamburg.de/IWWT/homepage/qmwps/qm302.pdf
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    Cited by:

    1. repec:got:cegedp:28 is not listed on IDEAS
    2. Broll, Udo & Hansen, Sabine, 2004. "Labour Demand and Exchange Rate Volatility," University of Göttingen Working Papers in Economics 28, University of Goettingen, Department of Economics.
    3. Udo Broll & Sabine Hansen-Averlant, 2010. "Exchange rate volatility, international trade and labour demand," International Economics and Economic Policy, Springer, vol. 7(4), pages 423-436, December.

    More about this item

    Keywords

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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