Exchange Rates and Wages

FRBNY Staff Report No. 116

31 Pages Posted: 21 Feb 2001

See all articles by Linda S. Goldberg

Linda S. Goldberg

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Joseph S. Tracy

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: January 2001

Abstract

Understanding the effects of exchange rate fluctuations across the population is important for increasingly globalized economies. Previous studies using industry aggregate data have found that industry wages are significantly more responsive than industry employment to exchange rate changes. We offer an explanation for this paradoxical finding. Using Current Population Survey data for 1976 through 1998, we document that the main mechanism for exchange rate effects on wages occurs through job turnover and the strong consequences this has for the wages of workers undergoing such job transitions. By contrast, workers who remain with the same employer experience little if any wage impacts from exchange rate shocks. In addition, we find that the least educated workers -who also have the most frequent job changes - shoulder the largest adjustments to exchange rates.

Keywords: exchange rates, wage growth, job-turnover, job-churning

JEL Classification: F31, F3, F4, J30, E24

Suggested Citation

Goldberg, Linda S. and Tracy, Joseph, Exchange Rates and Wages (January 2001). FRBNY Staff Report No. 116. Available at SSRN: https://ssrn.com/abstract=261058 or http://dx.doi.org/10.2139/ssrn.261058

Linda S. Goldberg

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-2836 (Phone)
212-720-6831 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Joseph Tracy (Contact Author)

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-6344 (Phone)
212-720-2630 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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