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Exchange rate uncertainty and employment: an algorithm describing ‘play’
Author(s) -
Belke Ansgar,
Göcke Matthias
Publication year - 2001
Publication title -
applied stochastic models in business and industry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.413
H-Index - 40
eISSN - 1526-4025
pISSN - 1524-1904
DOI - 10.1002/asmb.436
Subject(s) - exchange rate , econometrics , function (biology) , german , hysteresis , economics , regression , linear regression , computer science , mathematics , macroeconomics , statistics , physics , history , archaeology , quantum mechanics , evolutionary biology , biology
The paper deals with the impacts of exchange rate uncertainty on the relationship between macroeconomic labour market variables. Under uncertainty, areas of weak reactions—so‐called ‘play’ areas—have to be considered at the macrolevel. The width of the play area is a positive function of the degree of uncertainty. When changes go beyond the play‐area suddenly strong reactions (‘spurts’) occur. These non‐linear dynamics are captured in a simplified linearized way. An algorithm describing linear play hysteresis is developed and implemented into a regression framework. As an empirical application, the exchange rate impacts on German employment are analysed considering play effects. Copyright © 2001 John Wiley & Sons, Ltd.