RETHINKING OPTIMAL EXCHANGE RATE REGIMES WITH FRICTIONAL LABOR MARKETS

2014 ◽  
Vol 19 (5) ◽  
pp. 1116-1147 ◽  
Author(s):  
Alessia Campolmi ◽  
Ester Faia
Keyword(s):  
Exchange Rate ◽  
Labor Market ◽  
Labor Markets ◽  
Exchange Rate Regimes ◽  
Optimal Choice ◽  
Labor Market Institutions ◽  
Labor Costs ◽  
Exchange Rate Dynamics ◽  
Labor Market Dynamics ◽  
Frictional Labor Markets

Currency fluctuations are an important determinant of labor market dynamics. Vice versa, relative labor costs affect real exchange rate dynamics. The optimal choice of exchange rate regimes cannot neglect this nexus. We assess such a choice using a two-country model with frictional labor markets. The monetary authority faces a tension between the classical insulating property of floating exchange rates and the destabilizing effects of currency fluctuations on (relative) job flows. Results show that the second motive is important: optimal monetary policy prescribes (some) response to the exchange rate. We also reexamine the conditions for optimal policy in a currency area whose members experience asymmetries in labor market institutions.

EFFICIENT SORTING IN FRICTIONAL LABOR MARKETS WITH TWO-SIDED HETEROGENEITY

2014 ◽  
Vol 20 (1) ◽  
pp. 95-119 ◽  
Author(s):  
Luca Paolo Merlino
Keyword(s):  
Labor Market ◽  
Labor Markets ◽  
High Technology ◽  
Relative Strength ◽  
Wage Bargaining ◽  
Pigouvian Tax ◽  
Skilled Workers ◽  
Frictional Labor Markets ◽  
Do So ◽  
Search Externalities

This paper studies how search externalities and wage bargaining distort vacancy creation and the allocation of workers to jobs in markets with two-sided heterogeneity. To do so, I propose a model of a frictional labor market where heterogeneous workers decide which job to look for and firms decide which technology to adopt. At equilibrium, there is perfect segmentation across sectors, which is determined by a unique threshold of workers' productivity. This threshold is inefficient because of participation and composition externalities. The Pigouvian tax scheme that decentralizes optimal sorting shows that these externalities have opposite signs. Furthermore, their relative strength depends on the distribution of workers' skills, so that when there are many (few) skilled workers, too many (few) high-technology jobs are created.

scholarly journals EXOGENOUS INTEREST RATE AND EXCHANGE RATE DYNAMICS UNDER ELASTIC EXPECTATIONS

2021 ◽  
Vol 80 (318) ◽  
pp. 3
Author(s):  
Franklin Serrano ◽  
Ricardo Summa ◽  
Gabriel Aidar
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Interest Rates ◽  
Exchange Rate Regimes ◽  
Nominal Exchange Rate ◽  
Exchange Rate Dynamics ◽  
Policy Variable ◽  
Nominal Exchange Rates ◽  
Floating Exchange Rate ◽  
Short Run

<div class="WordSection1"><h1 align="center"><strong style="font-size: 10px;">ABSTRACT</strong></h1></div><p>A theory analyzing the short run dynamics of nominal exchange rates under exogenous interest rates and free imperfect international capital markets is presented. Introducing elastic exchange rate expectations leads to cumulative changes in the spot and forward exchange rates in the same direction. We find that free floating exchange rate regimes are intrinsically unstable, as the nominal exchange rate is an institutional or policy variable that has no ‘fundamental equilibrium’ level. Implications for monetary policy and exchange market interventions of this potential instability are derived. Our results help to explain both the empirical prevalence of dirty floating exchange rate regimes and some aspects of the uncovered interest parity ‘failure’.</p><p> </p><p align="center">TASA DE INTERÉS EXÓGENA Y DINÁMICA DEL TIPO DE CAMBIO CON EXPECTATIVAS ELÁSTICAS</p><p align="center"><strong>RESUMEN </strong></p><p>Presentamos un análisis teórico de la dinámica de corto plazo de los tipos de cambio nominales con tasas de interés exógenas y libres e imperfecta movilidad internacional de capitales. La introducción de expectativas de tipo de cambio elásticas conduce a variaciones acumulativas en los tipos de cambio <em>spot</em> y <em>forward</em> en la misma dirección. Los regímenes de tipo de cambio de flotación libre son intrínsicamente inestables, dado que el tipo de cambio nominal es una variable institucional o de política que no tiene un nivel de “equilibrio fundamental”. Derivamos implicaciones de esta inestabilidad potencial para la política monetaria y las intervenciones en los mercados cambiarios. Los resultados ayudan a explicar la prevalencia de tipos de cambio de flotación sucia y aspectos de la “falla” de la paridad de tasas de interés descubierta.</p>

Skill Shortages, Skill Gaps, and Labor Demand

2021 ◽  
pp. 71-106
Author(s):  
Michael J. Camasso ◽  
Radha Jagannathan
Keyword(s):  
Labor Market ◽  
Labor Markets ◽  
Labor Demand ◽  
Value Added ◽  
Labor Market Institutions ◽  
Skill Sets ◽  
Government Interventions ◽  
Goods And Services ◽  
Skill Gaps ◽  
Active Labor Market Policies

The focus in this chapter is on the consequences of employers’ decisions and on labor market institutions that create flexible, rigid, or segmented labor markets. The authors profile how each of the focal countries maintains culturally distinctive production functions and how these approaches to the creation of goods and services impact employment and overall economic performance. The importance of a labor market designed around the production of value-added product for export is highlighted, as is the pressure it places on renewal of knowledge and skill sets and flexible labor markets. Failures of the labor market in the forms of unemployment, underemployment, and low labor force participation have resulted in a variety of government interventions or active labor market policies. The authors examine the effectiveness of a number of these policies, including subsidies paid to employees, minimum wages, and employment subsidies to private businesses and public sector jobs.

Assembling a Labor Market

2019 ◽  
pp. 20-42
Author(s):  
Jeffrey J. Sallaz
Keyword(s):  
Labor Market ◽  
Labor Markets ◽  
New Technologies ◽  
The Philippines ◽  
Labor Costs ◽  
The Past ◽  
The World ◽  
Economic Process ◽  
Global Labor Market ◽  
Social Dynamic

The booming voice industry in the Philippines is a case of an emergent global labor market. New technologies developed over the past several decades allow companies to spin off or relocate their phone services anywhere in the world. Differences in labor costs across regions of the world matter, but the resulting search for ideal labor is as much a social as an economic process. To capture this social dynamic, this chapter analyzes markets as assemblages. The key mediators in such as assemblage are firms, states, and workers. This chapter provides the theoretical tools to understand labor markets as assemblages, and suggests why some assemblages are more stable than others.

scholarly journals Cross-Cutting Themes in Employment Experiences During the Crisis

Policy Papers ◽  
2010 ◽  
Vol 2010 (67) ◽  
Author(s):  
Keyword(s):  
Labor Market ◽  
Labor Markets ◽  
Labor Market Institutions ◽  
Labor Movements ◽  
Market Outcomes ◽  
Policy Responses ◽  
Dual Labor Markets ◽  
Wide Range ◽  
Permanent Shocks ◽  
Human Cost

The human cost of the recent global crisis is reflected in its impact on the labor market. Explaining why economies with similar downturns had very different employment trends can help design policies to reduce such costs and improve labor markets. This paper analyzes the recent employment experiences of six economies: Germany, Korea, Mexico, New Zealand, Spain, and Sweden. These economies represent a wide range of labor market institutions, policy responses, and outcomes to the crisis. The divergence of labor market outcomes and of the effectiveness of policies during the crisis can be explained by the interaction between the nature of the shocks and differences in the structure and institutions of each country’s economy. The worst job losses compared to the drop in output followed permanent shocks, particularly in dual labor markets and in the presence of wage rigidities. Policies to avoid job cuts were much more effective when they were well-targeted and responded to temporary shocks. In contrast, policies to facilitate labor movements were more appropriate following permanent shocks.

scholarly journals Strained Compromises? Danish Flexicurity During Crisis

2011 ◽  
Vol 1 (1) ◽  
pp. 45 ◽  
Author(s):  
Christian Lyhne Ibsen
Keyword(s):  
Labor Market ◽  
Labor Markets ◽  
Industrial Relations ◽  
Economic Conditions ◽  
Market Regulation ◽  
Labor Costs ◽  
Economic Cycle ◽  
Golden Triangle ◽  
Labor Market Flexibility ◽  
High Employment

The Danish concept of flexicurity in a `Golden Triangle´ of low job protection, high income security and high employment security is not only about a balance between labor market flexibility and social security. Arguably, it is also a series of more or less stable underlying compromises between social partners about the main mechanisms and aims of labor market regulation which - supposedly - should be focused on employment rather than jobs, and competition on quality rather than on labor costs. However, the `Golden Triangle´ - this article argues - seems in need of complementary concepts. The article therefore introduces, `centralized decentralization´ - a concept that directs our attention to forms of flexibility and security primarily for people in work. Most studies on Danish flexicurity have been carried out under favorable economic conditions. In light of the economic slump hitting Denmark in 2008, this article investigates if and how the recession challenged these compromises by comparing two rounds of case-based interviews in three metalworking companies in 2007 and 2009. It is shown that practice has indeed changed - albeit modestly - due to worsened economic circumstances. For example the case studies show that the hypothesized preference for external numerical flexibility is perhaps too crude as employers use different ways to restructure employment. Especially the examples of de facto concessionary bargaining to save jobs are important here - although the extent of concessions is modest. The evidence thus suggests that the `Golden Triangle´ flexicurity compromises are indeed strained by the economic cycle and that responses to impetus for restructuring are far more nuanced than sometimes portrayed. It is argues that more company studies across national labor markets and industrial relations institutions will enhance our understanding of the dynamics during times of restructuring.

scholarly journals Population and Labor Dynamics in Large Informal Markets: Implications for Pension Systems with Evidence from Ecuador

2021 ◽  
Vol 15 (2) ◽  
pp. 164-186
Author(s):  
Margarita Velín-Fárez
Keyword(s):  
Population Structure ◽  
Labor Market ◽  
Pension System ◽  
Age Groups ◽  
Developed Countries ◽  
Labor Market Institutions ◽  
Women's Labor ◽  
Pension Systems ◽  
Labor Market Dynamics ◽  
Labor Dynamics

This paper reviews Ecuador’s population structure and labor market dynamics with a focus on the causes of inequality, particularly among older adults receiving contributory pensions. This serves as a basis for characterizing the main restrictions that the Ecuadorian pension system must address. This analysis is valuable for three key reasons. First, the population structure of many less developed countries is converging toward that of developed countries, with older age groups increasing in proportion. Second, Ecuador is among the countries in Latin America and the Caribbean with the highest degree of informality in the labor market, which lowers the coverage of contributory pension schemes. Third, regarding gender inequality, the rate of women’s labor participation in 2010 was among the lowest in South America. The findings suggest that a younger population structure will not be the main solution to financial problems and the pension inadequacy that are facing most pension systems worldwide. Improvements in labor market institutions are required to increase the pension system’s insurance. The study concludes by discussing several proposals aimed at increasing pension coverage and reducing inequality.

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