Real Exchange Rates, Dollarization and Industrial Employment in Latin America

32 Pages Posted: 25 Apr 2006

See all articles by Arturo José Galindo

Arturo José Galindo

Inter-American Development Bank

Alejandro Izquierdo

Inter-American Development Bank (IDB) - Research Department

Jose Manuel Montero

Banco de España

Multiple version iconThere are 2 versions of this paper

Date Written: January 2006

Abstract

We use a panel dataset on industrial employment and trade for 9 Latin American countries for which liability dollarization data at the industrial level is available. We test whether real exchange rate fluctuations have a significant impact on employment, and analyze whether the impact varies with the degree of liability dollarization. Econometric evidence supports the view that real exchange rate depreciation can impact employment growth positively, but this effect is reversed as liability dollarization increases. In industries with high liability dollarization, the overall impact of a real exchange rate depreciation can be negative.

Keywords: Manufacturing employment, real exchange rates, debt composition, balance sheet effects

JEL Classification: E24, F31, F34, G32

Suggested Citation

Galindo, Arturo José and Izquierdo, Alejandro and Montero, Jose Manuel, Real Exchange Rates, Dollarization and Industrial Employment in Latin America (January 2006). Banco de Espana Research Paper No. WP-0601, Available at SSRN: https://ssrn.com/abstract=715141 or http://dx.doi.org/10.2139/ssrn.715141

Arturo José Galindo (Contact Author)

Inter-American Development Bank ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Alejandro Izquierdo

Inter-American Development Bank (IDB) - Research Department ( email )

1300 New York Ave., NW
Washington, DC 20577
United States

Jose Manuel Montero

Banco de España ( email )

Madrid 28014
Spain

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