Exchange rate uncertainty and labour market adjustment under fixed and flexible exchange rates

Yu-Fu Chen, Michael Funke

    Research output: Working paperDiscussion paper

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    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.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 2003

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.149
    ISSN (Print)1473-236X

    Keywords

    • Real option theory
    • Uncertainty
    • Working time
    • Employment
    • Labour demand
    • Exchange rates

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  • Cite this

    Chen, Y-F., & Funke, M. (2003). Exchange rate uncertainty and labour market adjustment under fixed and flexible exchange rates. (Dundee Discussion Papers in Economics; No. 149). University of Dundee.