Exchange Rates and Wages in an Integrated World
IMF Working Papers, March 1, 2009
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Bibliographic details
- Authors: Antonio Spilimbergo, Prachi Mishra
- Published: March 1, 2009
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451871920.001
Research question and scope
- Objective: Analyze how the pass-through from exchange rate to domestic wages depends on the degree of integration between domestic and foreign labor markets.
- Sample: Data from 66 countries over the period 1981–2005.
- Authors: Antonio Spilimbergo, Prachi Mishra.
- Date: March 1, 2009.
- Publication: IMF Working Paper No. 2009/044, Pages: 44, Volume: 2009, Issue: 044, Series: Working Paper No. 2009/044, Stock No: WPIEA2009044, ISBN: 9781451871920, ISSN: 1018-5941, DOI: https://doi.org/10.5089/9781451871920.001
Key empirical findings
- Elasticity estimates:
- For countries with high barriers to external labor mobility: elasticity of domestic wages to real exchange rate is 0.1 after a year.
- For countries with low barriers to external labor mobility: elasticity of domestic wages to real exchange rate is about 0.4 after a year.
- Robustness: Results are robust to the inclusion of various controls, different measures of exchange rates, and concepts of labor market integration.
Interpretation and implications
- Labor mobility alters the degree of exchange rate pass-through into domestic wages: higher integration (lower barriers) is associated with higher wage responsiveness to real exchange rate movements.
- Macroeconomic modeling implication: Findings call for including labor mobility in macro models of external adjustment.
Relevant subjects and keywords
- Subjects: Exchange rates, Foreign exchange, Labor, Labor markets, Migration, Population and demographics, Real exchange rates, Wages.
- Keywords: Eastern Europe, emigration rate, Europe, exchange rate movement, exchange rates, labor market integration, Labor markets, Middle East, Migration, pay, Real exchange rates, reservation wage, unemployment rate, wage data, wage rate, Wages, wages of immigrant, WP.
Source: IMF Working Paper "Exchange Rates and Wages in an Integrated World" (Antonio Spilimbergo, Prachi Mishra), March 1, 2009.