Real exchange rates and job flows: evidence from Turkey

Abstract

This study investigates the effects of the real exchange rate on job flows in Turkish manufacturing industries between 2006 and 2015 using data at the four-digit NACE Revision 2 level. Using dynamic panel data models, we find that a real appreciation increases gross and net job creation rates, and that the effect of appreciation is magnified as the exposure to international competitiveness of industries increases. We think that this is because Turkish manufacturing firms import a greater share of their inputs compared to the firms in developed countries. Hence, an appreciation creates more jobs because lower imported input costs enable firms to outcompete foreign producers.