Exchange Rate and Employment Project: Overview

by NGANDU, S., 2006
Research Report, Employment Growth & Development Initiative, Human Sciences Research Council

Ngandu summarises the Human Sciences Research Council’s project on the relationship between the exchange rate and employment outcomes, and its possible policy implications. While there appears to be consensus that the currency is too volatile, little attention has been paid to what an employment-inducing exchange rate would be. The suite of papers in the exchange rate project tries to fill these gaps. The exchange rate affects employment through many channels. Through the macroeconomic channel, an exchange rate depreciation could improve the competitiveness of a country’s exports. From a development perspective, an appropriate exchange rate policy combined with a commensurate industrial policy can be growth-inducing. Finally, through the labour-intensity channel, the exchange rate affects the labour-intensity of output in the tradable sector. This overview provides a general summary of the papers in exchange rate project. The papers include: Volatility of the real exchange rate of the rand, 1990–2004 · The effect of exchange rate volatility on trade and employment: A brief review of the literature ·  Resource-based exports and the rand ·  International findings on the relationship between the exchange rate and employment · The impact of exchange rate movements on employment: The economy-wide effect of a rand appreciation · Company strategies · Synthesis