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Exchange Rate Movements and Employment Growth: An OCA Assessment of the CEE Economies

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  • Ansgar Belke
  • Leo Kaas

Abstract

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 in the past. This paper takes a different approach and highlights the fact that high exchange rate volatility may also signal high costs for labor markets. The impact of exchange rate volatility on labor markets in the CEECs is analyzed, revealing that volatility vis-à-vis the euro significantly lowers employment growth. Hence, eliminating exchange rate volatility could be considered a substitute for removing employment protection legislation. Copyright Kluwer Academic Publishers 2004

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  • Ansgar Belke & Leo Kaas, 2004. "Exchange Rate Movements and Employment Growth: An OCA Assessment of the CEE Economies," Economic Change and Restructuring, Springer, vol. 31(2), pages 247-280, June.
    • Handle: RePEc:kap:ecopln:v:31:y:2004:i:2:p:247-280
    DOI: 10.1007/s10663-004-0886-5
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    2. F. V. Vieira & M. Holland & C. Gomes da Silva & L. C. Bottecchia, 2013. "Growth and exchange rate volatility: a panel data analysis," Applied Economics, Taylor & Francis Journals, vol. 45(26), pages 3733-3741, September.
    3. Demir, Firat, 2010. "Exchange Rate Volatility and Employment Growth in Developing Countries: Evidence from Turkey," World Development, Elsevier, vol. 38(8), pages 1127-1140, August.
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    9. Tatiana Evdokimova & Pavel Trunin & Andrei Zubarev, 2013. "The Impact of the Real Ruble Exchange Rate on the Economic Activity in Russia," Research Paper Series, Gaidar Institute for Economic Policy, issue 165P, pages 164-164.
    10. Gilles Saint-Paul, 2009. "Le dollar, l’innovation et l’emploi," Revue d'Économie Financière, Programme National Persée, vol. 94(1), pages 107-115.
    11. Anubha Dhasmana, 2021. "Employment growth in the face of exchange rate uncertainty: The role of trade and foreign equity finance," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 79-117, July.
    12. Feldmann, Horst, 2011. "The unemployment effect of exchange rate volatility in industrial countries," Economics Letters, Elsevier, vol. 111(3), pages 268-271, June.
    13. Aderbal Oliveira Damasceno & Flávio Vilela Vieir, 2014. "Desalinhamento Cambial, Volatilidade Cambial E Crescimento Econômico: Uma Análise Para A Economia Brasileira (1995-2011)," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41st Brazilian Economics Meeting] 100, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    14. Drazen Derado & Antonela Mlikota, 2007. "Is Croatia Ready For The Emu?: An Ex Ante Analysis Of Nominal And Real Convergence," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 16(2), pages 113-146, december.
    15. Hyunwoo Kim, 2023. "Monetary technocracy and democratic accountability: how central bank independence conditions economic voting," Review of International Political Economy, Taylor & Francis Journals, vol. 30(3), pages 939-964, May.
    16. Oğuz Tümtürk, 2022. "Global Uncertainty and Exchange Rate Volatility," EKOIST Journal of Econometrics and Statistics, Istanbul University, Faculty of Economics, vol. 0(37), pages 69-84, December.
    17. Ansgar Belke & Bernhard Herz & Lukas Vogel, 2006. "Beyond Trade – Is Reform Effort Affected by the Exchange Rate Regime? A Panel Analysis for the World versus OECD Countries," Economie Internationale, CEPII research center, issue 107, pages 29-58.

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