Working paper/research report

Publication year: 2004

DOI Link: https://doi.org/10.2139/ssrn.542562

Title of series: IZA Discussion Paper

Number in series: 1126

Abstract: 

In a baseline micro model a band of inaction due to hiring- and firing-costs is widened by option value effects of exchange rate uncertainty. Based on this micro foundation an aggregation approach is presented. Under uncertainty, intervals of weak response to exchange rate reversals (called 'play' areas) are introduced on the macro-level. 'Spurts' in new employment or firing may occur after an initially weak response. Since these mechanisms may apply to other investment cases where the aggregation of microeconomic real options effects under uncertainty are relevant, they may even be of a more general interest.

Harvard Citation style: Belke, A. and Göcke, M. (2004) Real Options Effects on Employment: Does Exchange Rate Uncertainty Matter for Aggregation?. (IZA Discussion Paper, 1126). Bonn: IZA - Institute of Labor Economics. https://doi.org/10.2139/ssrn.542562

APA Citation style: Belke, A., & Göcke, M. (2004). Real Options Effects on Employment: Does Exchange Rate Uncertainty Matter for Aggregation?. (IZA Discussion Paper, 1126). IZA - Institute of Labor Economics. https://doi.org/10.2139/ssrn.542562