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Labour market effects of currency appreciation: The case of Switzerland

Author

Listed:
  • Peter H. Egger
  • Johannes Schwarzer
  • Anirudh Shingal

Abstract

Recent work on labour market effects of globalization has generated both academic and populist interests. However, this work has focussed exclusively on the manufacturing sector. Moreover, general equilibrium effects of globalization have received little attention. This study contributes to filling both these gaps by examining the general equilibrium effects of external exposure on the labor market in Switzerland. We exploit exogenous exchange rate movements to identify trade-induced shocks across all sectors of the Swiss economy and transpose industry-level exposure to the municipal level, using detailed employment data on the entirety of Swiss firms. We find strong evidence for three channels of employment effects of currency appreciation - negative employment growth induced by increasing export uncompetitiveness and higher import competition, and positive employment growth induced by cheaper availability of foreign inputs. The combined average effect of the three channels on employment is found to be negative in our preferred results, with significant heterogeneity across municipalities.

Suggested Citation

  • Peter H. Egger & Johannes Schwarzer & Anirudh Shingal, 2018. "Labour market effects of currency appreciation: The case of Switzerland," RSCAS Working Papers 2018/30, European University Institute.
    • Handle: RePEc:rsc:rsceui:2018/30
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    References listed on IDEAS

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    Cited by:

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    3. Louisa Roos, 2025. "Gender and Monetary Policy: Labour Impacts of Exchange Rate Shocks," Trinity Economics Papers tep0725, Trinity College Dublin, Department of Economics.
    4. Twinam, Tate, 2020. "Trade Shocks and Growth: The Impact of the Quartz Crisis in Switzerland," SocArXiv twscm, Center for Open Science.

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    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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