Exchange Rate Uncertainty and Unemployment in Countries Applying for Admission to the EU: The Case for Euro-ization
Type de matériel :
TexteLangue : français Détails de publication : 2004.
Sujet(s) : Ressources en ligne : Abrégé : The traditional “optimum currency area” approach posits that little is lost in the transition to a very hard peg to a currency union if exchange rate variations are small. This paper looks at this approach from a different angle by considering that exchange rate volatility could well reflect high labor market costs. An analysis of the effect of exchange rate volatility on labor markets in the CEECs shows that exchange rate volatility significantly increases unemployment. The transition to a fixed exchange rate or the adoption of the euro could therefore be considered as a substitute for the removal of employment protection legislation.
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The traditional “optimum currency area” approach posits that little is lost in the transition to a very hard peg to a currency union if exchange rate variations are small. This paper looks at this approach from a different angle by considering that exchange rate volatility could well reflect high labor market costs. An analysis of the effect of exchange rate volatility on labor markets in the CEECs shows that exchange rate volatility significantly increases unemployment. The transition to a fixed exchange rate or the adoption of the euro could therefore be considered as a substitute for the removal of employment protection legislation.
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