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The Relationship Between the Exchange Rate, Terms of Trade and Employment in Turkey

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Listed:
  • Muhammad Salah Uddin
  • Zobayer Ahmed
  • Mahadi Hasan

Abstract

The objective of this paper is to analyze the impact of real exchange rate (RER) on employment and real wage using quarterly disaggregated data (ISIC Rev 4 classification) composed of 19 industries in Turkey from 2010 to 2017. This study employed the Fixed Effect Model, where industry-specific effects are used to control heterogeneity within the industry. The results reflect that currency appreciation negatively affects employment, though insignificant, whereas it has a remarkably positive impact on real wage. Although the terms of trade have no visible impact on employment and real wages, the study uniquely finds that the effects of the larger industries on employment are distinctly adverse. Nevertheless, the interaction between currency appreciation and the top 25 per cent larger industries indicates a moderate increase in employment. The findings reflect that the appreciation of the domestic currency causes employment to decrease at the industry level. The originality of this paper includes the effects of the terms of trade and interaction with currency appreciation in larger industries using the Fixed Effect Model approach.

Suggested Citation

  • Muhammad Salah Uddin & Zobayer Ahmed & Mahadi Hasan, 2022. "The Relationship Between the Exchange Rate, Terms of Trade and Employment in Turkey," Apuntes del Cenes, Universidad Pedagógica y Tecnológica de Colombia, vol. 41(74), pages 177-200, July.
    • Handle: RePEc:col:000152:020726
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    File URL: https://revistas.uptc.edu.co/index.php/cenes/article/view/14251
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    More about this item

    Keywords

    Employment; Exchange Rate; Terms of Trade; Real Wage; Turkey.;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F00 - International Economics - - General - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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