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File name: SSRN-id329480. ; Size: 214K
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Exchange Rate Uncertainty and Labour Market Adjustment
under Fixed and Flexible Exchange Rates
Michael Funke
University of Hamburg - Department of Economics and Business Administration; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
Yu-Fu Chen
University of Dundee - Department of Economic Studies
September 2002
CESifo Working Paper Series No. 779; HWWA Discussion Paper No. 196
Abstract:
The standard literature on working time has modelled the decisions of firms in a deterministic framework in which firms can choose between employment and overtime (given mandated standard hours). Contrary to this approach, we follow the real options approach, which allows us to investigate the value to a firm of waiting to adjust labour when the firm's revenues in domestic currency are stochastic and adjustment costs are sunk. The simulations reject the null hypothesis that all exchange rate regimes obey common employment adjustment thresholds.
Number of Pages in PDF File: 31
Keywords: Real Option Theory, Uncertainty, Working Time, Employment, Labour Demand, Exchange Rates
JEL Classification: D81, E24, J23, F31
working papers series
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Date posted: November 6, 2002
Suggested CitationFunke, Michael and Chen, Yu-Fu, Exchange Rate Uncertainty and Labour Market Adjustment
under Fixed and Flexible Exchange Rates (September 2002). CESifo Working Paper Series No. 779; HWWA Discussion Paper No. 196. Available at SSRN: http://ssrn.com/abstract=329480
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