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    Exchange-rate volatility as employment protection

    Zoega, Gylfi and Chen, Y.-F. (2001) Exchange-rate volatility as employment protection. Working Paper. Birkbeck, University of London, London, UK.

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    Two issues; the liberalisation of labour markets and monetary unification, have taken centre stage in policy debates on the future of the European Union. We show that both have the effect of raising capital mobility as well as labour-market flexibility. The reduction of exchange-rate fluctuations reduces the cost of both entering a market – by setting up companies and hiring new employees – as well as exiting by dismantling existing capital structures and firing employees. Thus the adoption of a single currency has effects very similar to the removal of employment-protection legislation and other direct restrictions on hiring and firing. The distinction between structural reforms in the labour market and monetary reforms may for this reason not be very helpful in finding the keys to higher employment growth in Europe. However, exchange-rate volatility is more harmful for the entry of new firms, particularly promising, high-risk ventures.


    Item Type: Monograph (Working Paper)
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Depositing User: Sarah Hall
    Date Deposited: 08 Dec 2020 15:49
    Last Modified: 02 Aug 2023 18:06


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