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Exchange Rate Volatility and Employment Growth: Empirical Evidence from the CEE Economies

  • Belke, Ansgar

    ()

    (University of Duisburg-Essen)

  • Setzer, Ralph

    ()

    (University of Hohenheim)

According to the traditional 'optimum currency area' approach, not much will be lost from a very hard peg to a currency union if there has been little reason for variations in the exchange rate. This paper takes a different approach and highlights the fact that high exchange rate volatility may as well signal high costs for labor markets. The impact of exchange rate volatility on labor markets in the CEECs is analyzed, finding that volatility visà- vis the euro significantly lowers employment growth. Hence, the elimination of exchange rate volatility could be considered as a substitute for a removal of employment protection legislation.

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File URL: http://ftp.iza.org/dp1038.pdf
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1038.

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Length: 36 pages
Date of creation: Mar 2004
Date of revision:
Publication status: published in: Economic and Social Review, 2003, 34 (3), 267-292
Handle: RePEc:iza:izadps:dp1038
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  9. André Sapir & Khalid Sekkat, 1990. "Exchange rate volatility and international trade: the effects of the European monetary system," ULB Institutional Repository 2013/8228, ULB -- Universite Libre de Bruxelles.
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  15. Rose, Andrew K, 1994. "Exchange Rate Volatility, Monetary Policy, and Capital Mobility: Empirical Evidence on the Holy Trinity," CEPR Discussion Papers 929, C.E.P.R. Discussion Papers.
  16. Ansgar Belke & Daniel Gros, 2001. "Designing EU-US Atlantic Monetary Relations: Exchange Rate Variability and Labor Markets," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 195/2001, Department of Economics, University of Hohenheim, Germany.
  17. Rose, Andrew, 1999. "One Money, One Market: Estimating the Effect of Common Currencies on Trade," Seminar Papers 678, Stockholm University, Institute for International Economic Studies.
  18. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-71, November.
  19. Buiter, Willem H. & Grafe, Clemens, 2002. "Anchor, Float or Abandon Ship: Exchange Rate Regimes for Accession Countries," CEPR Discussion Papers 3184, C.E.P.R. Discussion Papers.
  20. Attila Csajbók (ed.) & Ágnes Csermely (ed.), 2002. "Adopting the euro in Hungary: expected costs, benefits and timing," MNB Occasional Papers 2002/24, Magyar Nemzeti Bank (Central Bank of Hungary).
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  24. Canzoneri, Matthew B & Vallés Liberal, Javier & Viñals, José, 1996. "Do Exchange Rates Move to Address International Macroeconomic Imbalances?," CEPR Discussion Papers 1498, C.E.P.R. Discussion Papers.
  25. Ansgar Belke & Daniel Gros, 2001. "Real Impacts of Intra-European Exchange Rate Variability: A Case for EMU?," Open Economies Review, Springer, vol. 12(3), pages 231-264, July.
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