Exchange Rate Fluctuations and Labour Market Adjustments in Canadian Manufacturing Industries
We estimate the impact of exchange rate fluctuations and other external factors on hours worked and employment in Canada’s manufacturing industries. The analysis is based on a dynamic model of labour demand and the econometric strategy employs a dynamic OLS approach for cointegrating regressions. Our data is drawn from a panel of 20 manufacturing industries, from Statistics Canada’s KLEMS database, and covers a long sample that includes two full cycles of appreciation and depreciation in the value of the Canadian dollar. We find that exchange rate fluctuations have economically and statistically significant effects on the labour choices of Canada’s manufacturing employers, and that these effects are stronger for industries more exposed to trade. In addition, we find that the enactment of NAFTA in 1994 has had a negative impact on labour in manufacturing industries. Finally, we report that employment reacts faster than total hours worked, suggesting that hours worked per employee react in a countercyclical fashion to exchange rate fluctuations.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (514) 987-8161
Web page: http://www.cirpee.org/
More information through EDIRC
References listed on IDEAS
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.:
- Serena Ng & Pierre Perron, 1997.
"Lag Length Selection and the Construction of Unit Root Tests with Good Size and Power,"
Boston College Working Papers in Economics
369, Boston College Department of Economics, revised 01 Sep 2000.
- Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
- Noel Gaston & Daniel Trefler, 1997. "The Labour Market Consequences of the Canada-U.S. Free Trade Agreement," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 18-41, February.
- Jose Manuel Campa & Linda S. Goldberg, 1998.
"Employment versus wage adjustment and the U.S. dollar,"
56, Federal Reserve Bank of New York.
- Jose Manuel Campa & Linda S. Goldberg, 2001. "Employment Versus Wage Adjustment And The U.S. Dollar," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 477-489, August.
- José Manuel Campa & Linda S. Goldberg, 1999. "Employment versus Wage Adjustment and the U.S. Dollar," Working Papers 99-07, New York University, Leonard N. Stern School of Business, Department of Economics.
- Jose Manuel Campa & Linda S. Goldberg, 1998. "Employment versus Wage Adjustment and the US Dollar," NBER Working Papers 6749, National Bureau of Economic Research, Inc.
- Dekle, Robert, 1998. "The yen and Japanese manufacturing employment," Journal of International Money and Finance, Elsevier, vol. 17(5), pages 785-801, October.
- Danny Leung & Terence Yuen, 2007.
"Labour Market Adjustments to Exchange Rate Fluctuations: Evidence from Canadian Manufacturing Industries,"
Open Economies Review,
Springer, vol. 18(2), pages 177-189, April.
- Danny Leung & Terence Yuen, 2005. "Labour Market Adjustments to Exchange Rate Fluctuations: Evidence from Canadian Manufacturing Industries," Staff Working Papers 05-14, Bank of Canada.
- John C. Driscoll & Aart C. Kraay, 1998. "Consistent Covariance Matrix Estimation With Spatially Dependent Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 549-560, November.
- Li, Hongyi & Maddala, G. S., 1997.
"Bootstrapping cointegrating regressions,"
Journal of Econometrics,
Elsevier, vol. 80(2), pages 297-318, October.
- Tom Doan, . "RATS program to demonstrate bootstrapping with cointegration," Statistical Software Components RTZ00021, Boston College Department of Economics.
- Parker, Cameron & Paparoditis, Efstathios & Politis, Dimitris N., 2006. "Unit root testing via the stationary bootstrap," Journal of Econometrics, Elsevier, vol. 133(2), pages 601-638, August.
- Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003.
"Testing for unit roots in heterogeneous panels,"
Journal of Econometrics,
Elsevier, vol. 115(1), pages 53-74, July.
- Tom Doan, . "IPSHIN: RATS procedure to implement Im, Pesaran and Shin panel unit root test," Statistical Software Components RTS00098, Boston College Department of Economics.
- Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
- Stefano Fachin, 2005.
"Long-Run Trends in Internal Migrations in Italy: a Study in Panel Cointegration with Dependent Units,"
- Stefano Fachin, 2007. "Long-run trends in internal migrations in italy: a study in panel cointegration with dependent units," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 401-428.
- Richard Dion, 2000. "Trends in Canada's Merchandise Trade," Bank of Canada Review, Bank of Canada, vol. 1999(Winter), pages 29-41.
- Moon, H.R.Hyungsik Roger & Perron, Benoit, 2004.
"Testing for a unit root in panels with dynamic factors,"
Journal of Econometrics,
Elsevier, vol. 122(1), pages 81-126, September.
- Hyungsik Roger MOON & Benoit PERRON, 2002. "Testing For A Unit Root In Panels With Dynamic Factors," Cahiers de recherche 18-2002, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- MOON, Hyungsik Roger & PERRON, Benoit., 2002. "Testing for a Unit Root in Panels with Dynamic Factors," Cahiers de recherche 2002-18, Universite de Montreal, Departement de sciences economiques.
- Nelson C. Mark & Donggyu Sul, 2002.
"Cointegration Vector Estimation by Panel DOLS and Long-Run Money Demand,"
NBER Technical Working Papers
0287, National Bureau of Economic Research, Inc.
- Nelson C. Mark & Donggyu Sul, 2003. "Cointegration Vector Estimation by Panel DOLS and Long-run Money Demand," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 655-680, December.
- Peter C. B. Phillips & Donggyu Sul, 2003. "Dynamic panel estimation and homogeneity testing under cross section dependence *," Econometrics Journal, Royal Economic Society, vol. 6(1), pages 217-259, 06.
- Paparoditis, Efstathios & Politis, Dimitris N, 2001. "Unit Root Testing via the Continuous-Path Block Bootstrap," University of California at San Diego, Economics Working Paper Series qt9qb4r775, Department of Economics, UC San Diego.
- Kao, Chihwa, 1999. "Spurious regression and residual-based tests for cointegration in panel data," Journal of Econometrics, Elsevier, vol. 90(1), pages 1-44, May.
- James H. Stock & Mark W. Watson, 1991.
"A simple estimator of cointegrating vectors in higher order integrated systems,"
Working Paper Series, Macroeconomic Issues
91-3, Federal Reserve Bank of Chicago.
- Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
- Lafrance, Robert & Osakwe, Patrick & St-Amant, Pierre, 1998. "Evaluating Alternative Measures of the Real Effective Exchange Rate," Staff Working Papers 98-20, Bank of Canada.
- Westerlund, Joakim & Edgerton, David L., 2007. "A panel bootstrap cointegration test," Economics Letters, Elsevier, vol. 97(3), pages 185-190, December.
- Chang, Yoosoon & Park, Joon & Song, Kevin, 2002.
"Bootstrapping Cointegrating Regressions,"
2002-04, Rice University, Department of Economics.
- Phillips, Peter C B & Hansen, Bruce E, 1990.
"Statistical Inference in Instrumental Variables Regression with I(1) Processes,"
Review of Economic Studies,
Wiley Blackwell, vol. 57(1), pages 99-125, January.
- Tom Doan, . "FM: RATS procedure to estimate cointegrating vectors using Fully Modified Least Squares," Statistical Software Components RTS00069, Boston College Department of Economics.
- Eugene Beaulieu, 2000. "The Canada-U.S. Free Trade Agreement and labour market adjustment in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 33(2), pages 540-563, May.
- Francesca Di Iorio & Stefano Fachin, 2009. "A residual-based bootstrap test for panel cointegration," Economics Bulletin, AccessEcon, vol. 29(4), pages 3222-3232.
When requesting a correction, please mention this item's handle: RePEc:lvl:lacicr:1227. 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: (Manuel Paradis)
If references are entirely missing, you can add them using this form.