Exchange Rates and Jobs: What Do We Learn from Job Flows?

75 Pages Posted: 27 Aug 2000 Last revised: 5 Oct 2022

See all articles by Pierre-Olivier Gourinchas

Pierre-Olivier Gourinchas

University of California, Berkeley - Department of Economics; University of California, Berkeley - Economic Analysis & Policy Group; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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Date Written: December 1998

Abstract

Currency fluctuations provide a substantial source of movements in relative prices that is largely exogenous to the firm. This paper evaluates empirically and theoretically the importance of exchange rate movements on job reallocation across and within sectors. The objective is (1) to provide accurate estimates of the impact of exchange rate fluctuations and (2) to further our understanding of how reallocative shocks propagate through the economy. The empirical results indicate that exchange rates have a significant effect of gross and net job flows in the traded goods sector. Moreover, the paper finds that job creation and destruction comove positively, following a real exchange rate shock. Appreciations are associated with additional turbulence, and depreciations with a existing non-representative agent reallocation models have a hard time replicating the salient features of the data. The results indicate a strong tension between the positive comovements of gross flows in response to reallocative disturbances and the negative comovement in response to aggregate shocks.

Suggested Citation

Gourinchas, Pierre-Olivier, Exchange Rates and Jobs: What Do We Learn from Job Flows? (December 1998). NBER Working Paper No. w6864, Available at SSRN: https://ssrn.com/abstract=227620

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