Exchange rates, employment and labour market rigidity

In this paper, we study the effect of labour market rigidity on the impact of exchange rate shocks on employment. We use a panel dataset comprising 22 manufacturing sectors across 23 OECD countries. In our econometric model, the impact of exchange rate fluctuations on sectoral employment is mediated...

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Bibliographic Details
Main Author: Alexandre, Fernando (author)
Other Authors: Cerejeira, João (author), Portela, Miguel (author), Bação, Pedro (author)
Format: article
Language:eng
Published: 2017
Subjects:
Exchange rates
International trade
Labour market
Employment protection
Social Sciences
Online Access:http://hdl.handle.net/1822/49120
Country:Portugal
Oai:oai:repositorium.sdum.uminho.pt:1822/49120
Description
Summary:In this paper, we study the effect of labour market rigidity on the impact of exchange rate shocks on employment. We use a panel dataset comprising 22 manufacturing sectors across 23 OECD countries. In our econometric model, the impact of exchange rate fluctuations on sectoral employment is mediated by the degree of openness and by a measure of labour market rigidity: the OECD's employment protection legislation (EPL) index. Our results suggest that greater labour market rigidity reduces the impact of exchange rate shocks on employment. This effect is statistically significant for low-technology sectors.

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