An International Comparison of Employment Adjustment to Exchange Rate Fluctuations

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This paper evaluates the response of employment to exchange rate shocks at the industry level for the G-7 countries. Using a simple empirical framework that places little a priori structure on the pattern of response to shocks, we find the data are consistent with the view that employment in European industries, at least France and Germany, is much less influenced by exchange rate shocks and much slower to adjust to long run steady states. The United States, Japan, Canada, the United Kingdom and Italy all appear to adjust more quickly. German and Japanese employment are quite insensitive to exchange rate fluctuations, consistent with previous research on output and markup responses to exchange rates.

Published: Review of International Economics (February 1998): 151-163.

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