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Manufacturing Employment And Exchange Rates In The Portuguese Economy: The Role Of Openness, Technology And Labour Market Rigidity

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Executive Summary

In this paper, the authors explore empirically the role of openness, technology and labour market rigidity in the determination of the effect of the exchange rate on employment in Portugal. They develop an index that allows them to measure labour market flexibility at the sector level. This index shows that labour market flexibility has been increasing in all manufacturing sectors and that the labour market in high technology sectors is more flexible than in low technology sectors. They use this index in the estimation of an employment regression, focusing on the effect of exchange rate movements.

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