The unemployment effect of exchange rate volatility in industrial countries

Feldmann, Horst

doi:10.1016/j.econlet.2011.01.003

Cited by 34 publications

(25 citation statements)

References 12 publications

(5 reference statements)

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“…Evidence of an adverse impact on productivity, domestic investment, consumption and growth can be found in papers by Braun and Larrain (2005), Aghion et al (2009), Schnabl (2009, Bahmani-Oskooee and Xi (2011) and Bahmani-Oskooee and Hajilee (2013). Feldmann (2011) finds evidence that higher exchange rate volatility raises the unemployment rate in a country. The evidence on the impact of exchange rate volatility on international trade is mixed.…”

Section: Introductionmentioning

confidence: 99%

Economic Policy Uncertainty and Exchange Rate Volatility

Krol

2014

International Finance

159

100

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This paper investigates the impact of general economic and economic policy uncertainty on exchange rate volatility for ten industrial and emerging economies since 1990. The results in this paper suggest that home and US economic policy uncertainty directly increase exchange rate volatility for some of the currencies examined. For the more integrated industrial economies, there is strong evidence that both home‐country and US economic policy uncertainty increase currency volatility during bad economic times. For the less integrated emerging economies, only home‐country economic policy uncertainty increases exchange rate volatility during bad economic times. General economic uncertainty also increases exchange rate volatility, but its impact is generally smaller than that of economic policy uncertainty. Given that previous research has found a negative relationship between exchange rate volatility and economic activity, these results suggest that economic policy uncertainty can negatively affect economic performance.

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Section: Introductionmentioning

confidence: 99%

Economic Policy Uncertainty and Exchange Rate Volatility

Krol

2014

International Finance

159

100

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“…Their finding is that variability of the domestic exchange rate with respect to the US Dollar and the Euro are significantly related to higher unemployment rates in Brazil and Argentina. Analysing a panel data set of 17 industrial countries,Feldmann (2011b) confirms that real effective exchange rate volatility (measured on the basis of a GARCH(1,1) model) is positively linked to unemployment rates. Inflation variability and exchange rate variability might be highly relevant as central bank transparency could have an influence on those two variables.…”

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confidence: 72%

The unemployment effect of central bank transparency

Weber

2019

Empir Econ

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Most central banks around the world have increased their transparency in the recent past. The greater openness of central bankers manifests itself in the publication of the central banks' own macroeconomic forecasts or the disclosure of minutes and voting records of central bank committees. The intention of this policy is to build credibility and achieve better economic outcomes. The question is whether higher transparency comes at some cost, i.e. higher unemployment or higher unemployment variability. Firstly, the article shows in a theoretical model that opaqueness regarding the central bank's preferences does not necessarily lead to lower unemployment. Secondly, the paper analyses the main theoretical results of other authors, namely that transparency leads to higher wages, higher unemployment, and higher unemployment volatility. The results of the estimations show that there is no evidence that central bank transparency leads to higher wages. We can also reject the hypothesis that transparency induces higher unemployment. In fact, the analyses show that central bank transparency can reduce the detrimental effect that central bank independence has on employment. Furthermore, the estimations confirm that central bank transparency does not lead to higher unemployment volatility but can reduce it in most cases. JEL: E24, E42, E58

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Section: Article History Abstractmentioning

confidence: 99%

“…Trade theory suggest that a depreciation of real exchange rate increases the competitiveness of the country's exports and hence the demand for labour increases. On the other hand, a depreciation of real exchange rate increases the cost of intermediate inputs which might offset the first effect such affect production level adversely which tends to reduce competitiveness of the country export and hence, demand for labour decreases (Demir, 2010;Feldmann, 2011).In Nigeria, statistics revealed that between 2013 and 2014, the unemployment rate increased from 16.7 to 17.1, despite an increase in annual real GDP from 5.4% to 6.3% with a decrease in the annual inflation from 8.5% to 8% whereby an improvement of real effective exchange rate occurred from 74.20 and 69. 51.…”

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Issues of Unemployment in Nigeria: Effect of Real Exchange Rate and Inflation Interaction

Olanrewaju

2019

Quarterly Journal of Econometrics Research

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Article History KeywordsInflation Real exchange rate Unemployment Generalized moment method Marginal effect Interaction of real exchange rate and inflation.Contribution/Originality: This study contributes to the existing studies by distinguishing itself identifying the simultaneous impact of these two fluctuating variables (inflation rate and real exchange rate ) on unemployment, unlike existing literatures which addressed these impacts on unemployment separately and assessing how inflation influences the impact of real exchange rate on unemployment in Nigeria. The study adopts descriptive analysis and generalized method of moment. 1969). Another argument is that trade-off between inflation and unemployment exist in long run because of money supply and productivity growth leads to decrease in unemployment, while supply shock like oil prices leads to increase in unemployment and that increase in productivity growth causes decrease in inflation and also fall in unemployment (Tang and Lean, 2009; Karanassou and Sala, 2010).The relationship between exchange rate and unemployment is controversial, if positive or negative relationship exists between the two variables. Literature establishes that changes in real exchange rates have tendency of impacting the reallocation of resources between sectors of the economy as they reflect changes in relative prices of domestic and foreign goods which influence employment in an economy. Trade theory suggest that a depreciation of real exchange rate increases the competitiveness of the country's exports and hence the demand for labour increases. On the other hand, a depreciation of real exchange rate increases the cost of intermediate inputs which might offset the first effect such affect production level adversely which tends to reduce competitiveness of the country export and hence, demand for labour decreases (Demir, 2010;Feldmann, 2011).In Nigeria, statistics revealed that between 2013 and 2014, the unemployment rate increased from 16.7 to 17.1, despite an increase in annual real GDP from 5.4% to 6.3% with a decrease in the annual inflation from 8.5% to 8% whereby an improvement of real effective exchange rate occurred from 74.20 and 69. 51. Subsequently, unemployment further reveled 17.6 %, 18 % and 18.5% in 2015, 2016 and 2017 respectively. The corresponding real GDP were 2.7%, -1.6% and 0.8% in 2015, 2016 and 2017 respectively. The purchasing power of households further declined as a result of a continuous increase in the annual inflation with 9% in 2015, 15.7% in 2016 and 16.5% in 2017 while the depreciated real effective exchange rates in 2015 was 70.83, when 80.35 and 85.62 were recorded in 2016 and 2017 respectively. This trend contradicted economic postulations that predicted inverse relationship between inflation and unemployment; a depreciated real depreciation was expected to improve and boost real GDP which in turn expected to have a drastically decline in the rate of unemployment via increase in export. Most existing studies have addressed the effect of inflation a...

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The unemployment effect of exchange rate volatility in industrial countries

Cited by 34 publications

References 12 publications

Economic Policy Uncertainty and Exchange Rate Volatility

Economic Policy Uncertainty and Exchange Rate Volatility

The unemployment effect of central bank transparency

Issues of Unemployment in Nigeria: Effect of Real Exchange Rate and Inflation Interaction

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