Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22155
Authors: 
Broll, Udo
Hansen, Sabine
Year of Publication: 
2004
Series/Report no.: 
CeGE discussion paper 28
Abstract: 
The purpose of this paper is to assess under what conditions exchange rate volatility exerts a positive effect on a firm's labour demand. As the exchange rate volatility increases, so does the value of the export option provided the firm under study is flexible. Flexibility is important because it gives the firm option value. Higher volatility increases the potential gains from trade and may increase the demand for labour. This may explain part of the mixed empirical findings regarding the effects of exchange rate risk on labour demand and international trade.
Subjects: 
Labour demand
Exchange rate risk
Risk aversion
Flexibility
Real option
International trade
JEL: 
F16
F41
F31
F23
Document Type: 
Working Paper

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