Exchange Rates and Employment

Abstract

The analysis of exchange rates and employment has received scant attention in development economics. This is surprising, since there appears to be a number of well-defined transmission channels through which exchange rates impact on employment. In South Africa this is particularly important given the rand's higher volatility relative to other emerging economies. The main focus of this paper is to give an overview of the transmission channels through which exchange rates affect employment and to discuss the standard methodological approach to conceptualising the impact of exchange rates on employment. Given the sector-specific impact of exchange rates which are conditioned by industry characteristics, such as the degree of external orientation, there will always be winners and losers in the face of a currency shock. This means the full impact of exchange rates on employment can only be dealt with in an economy-wide framework. Results from a computable general equilibrium (CGE) model are presented to demonstrate that even in a country with unreliable employment data such as South Africa, one can still analyse exchange rate and employment issues. JEL Classification: F16, E24, F31, J23

The Effect of Exchange Rate Movements and Economic Growth on Job Creation

“…Ngandu (2008) asserts that an appreciation of the exchange rate promotes employment growth, while results by Bhorat et al (2014) dispute this notion as their results found a depreciation to be in favour of employment creation. The conflicting results from empirical studies among different developing countries calls further research on this topic.…”

“…Van der Merwe and Mollentze (2010) categorise measurements of exchange rate under nominal and real exchange rates. Fluctuations in a nation's currency or exchange rate exert changes in domestic production costs (Ngandu, 2008). Nucci and Pozzolo (2010) state that the exchange rate affects the labour market based on channels of appreciation and depreciation of currencies.…”

Macroeconomic Impact on the Exchange Rate of SAARC Countries

“…To determine whether there exists any relationship between exchange rate and unemployment rate many previous study took effective efforts where Apergis (2000), Djivre and Ribon (2000), Filztekin (2004), Milas and Legrenzi (2006), Ngandu (2008), Broll and Sabine (2010), Nyahokwe and Ncwadi (2013) and Abdul Rahim et al, (2013) all of these researchers postulated that the exchange rate is positively and momentously related with unemployment rate. Contrary to above all listed results Mohammadi and Gholami (2008) disapproved the existence of the significant relationship between exchange rate and unemployment rate.…”

Real exchange rate undervaluation and sectoral growth in South Africa

“…The sectors considered are agriculture, mining, manufacturing, tourism, financial and the personal services sector for the period spanning 1985 through 2014. Previous studies on exchange rate undervaluation in the context of South Africa are Bhorat et al (2014), Zwedala (2013), Elbadawi et al (2012), Sibanda et al (2013), Mpofu (2013), Ngandu (2008) and Njindan (2017). Our study differs in that it uses a system GMM estimator and a dynamic panel data approach at a sectoral level with a sample that consists of both goods and service sectors.…”