Real exchange rates, dollarization and industrial employment in Latin America

Serie: Documentos de Trabajo. 0601.

Autor: Arturo Galindo, Alejandro Izquierdo y José Manuel Montero.

Publicado en: Emerging Markets Review - 8 (4), pp. 284-298

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Real exchange rates, dollarization and industrial employment in Latin America (959 KB)

Resumen

We use a panel dataset on industrial employment and trade for 9 Latin American countries for which liability dollarization data at the industrial level is available. We test whether real exchange rate fluctuations have a significant impact on employment, and analyze whether the impact varies with the degree of trade openness and liability dollarization. Econometric evidence supports the view that real exchange rate depreciations can impact employment growth positively, but this effect is reversed as liability dollarization increases. In industries with high liability dollarization, the overall impact of a real exchange rate depreciation can be negative.