 Labour Market Adjustments to Exchange Rate Fluctuations: Evidence from Canadian Manufacturing IndustriesDanny Leung and Terence Yuen Staff Working Papers from Bank of Canada Abstract: The authors provide some of the first empirical evidence on labour market adjustments to exchange rate movements in Canadian manufacturing industries. Generalized method of moments estimates that control for endogeneity show that there are significant changes in labour input when a change in the exchange rate occurs. During the 1981–97 period, the cumulative effect of a 10 per cent depreciation (appreciation) of the Canadian dollar was a 10 to 12.5 per cent increase (decline) in labour input. The majority of this effect was due to the increase (decrease) in the demand for domestically produced goods both at home and abroad when a depreciation (appreciation) occurs. The authors find evidence that the responsiveness of labour input to exchange rate movements was greater in the 1990s than in the 1980s. They also find that industries with high and medium net trade exposures adjust their labour inputs more than industries with low trade exposures. The exchange rate effect on real wages is estimated to be virtually zero for all manufacturing industries. Keywords: Labour Markets; Exchange rates (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:05-14 Access Statistics for this paper More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC. |
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