Journal article

Publication year: 2005

Pages: 185-203

Journal: German Economic Review

Volume number: 6

Issue number: 2

DOI Link: https://doi.org/10.1111/j.1465-6485.2005.00126.x

Publisher: De Gruyter Brill

Abstract: 

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

Harvard Citation style: Belke, A. and Göcke, M. (2005) Real Options Effects on Employment: Does Exchange Rate Uncertainty Matter for Aggregation?, German Economic Review, 6(2), pp. 185-203. https://doi.org/10.1111/j.1465-6485.2005.00126.x

APA Citation style: Belke, A., & Göcke, M. (2005). Real Options Effects on Employment: Does Exchange Rate Uncertainty Matter for Aggregation?. German Economic Review. 6(2), 185-203. https://doi.org/10.1111/j.1465-6485.2005.00126.x