Abstract

http://ssrn.com/abstract=329480
 
 

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Exchange Rate Uncertainty and Labour Market Adjustment
under Fixed and Flexible Exchange Rates


Michael Funke


Hamburg University, Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

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

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Date posted: November 6, 2002  

Suggested Citation

Funke, 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

Contact Information

Michael Funke (Contact Author)
Hamburg University, Department of Economics ( email )
Von-Melle-Park 5
Hamburg, 20146
Germany
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
Yu-Fu Chen
University of Dundee - Department of Economic Studies ( email )
Dundee DD1 4HN, Scotland
United Kingdom
+44 1382 344 383 (Phone)
+44 1382 344 691 (Fax)
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