The Effects of Real Exchange Rate, External Finance

This book focuses on three issues. First, it investigates the impact of uctuations in international trade competitiveness on employment in the UK manufacturing sector over the period 1999 to 2010. We find statistically significant effects of a shock to international trade competitiveness on the level of employment. We suggest that the adjustment process in employment mainly works through job creation. We also find that compared to large firms, small firms contribute more towards job creation than job destruction. Our results show that changes in GDP growth rate and average wages are significantly related to employment, suggesting that the UK labor market responds significantly to market forces. Finally, we find that the effect of changes in the real exchange rate on both job creation and job destruction differs for exporting and non-exporting firms.