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Exchange rate movements and manufacturing employment in Tunisia: Do different categories of firms react similarly?

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Abstract

Based on a micro-level dataset composed of 548 firms operating in Tunisian manufacturing industries, we examine the effects of exchange rates on employment over the period 1997–2002. The estimation of a dynamic employment equation using the system GMM technique suggests that employment positively responds to the depreciation of effective exchange rates and bilateral exchange rates vis-à-vis the Euro and the US dollar. Moreover, the different elasticities of employment to exchange rates vary according to specific characteristics of firms such as the ownership structure, the international exposure, the size and the industries to which they belong. Finally, using different measures of volatility, we confirm that the exchange rate volatility significantly lowers the employment level in all categories of firms.

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Notes

  1. For an overview of the relationship between exchange rate dynamics and economic growth, see Berg and Miao (2010).

  2. Between 1980 and 2009, the average gross domestic product growth rate has been about 4.5 %.

  3. The access to data covering the period following 2002 has not been possible. Recently, Ghazali (2012) conducts a study on the impact of international trade on labor demand. The author is based on the same dataset during the period 1998–2002.

  4. The classification is based on the definition used by the National Institute of Statistics, which classifies firms according to the number of workers.

  5. The classification is based on the definition used by the National Institute of Statistics.

  6. The classification is based on the definition of many international organizations such as the IMF and the OECD. A foreign direct investment enterprise is an enterprise in which a foreign investor owns 10 % or more of the capital.

  7. We make use of the direct quotation. Thus, an increase in the exchange rate reflects a depreciation of the Tunisian dinar while a fall is a sign of an appreciation.

  8. ECU refers to the European Currency Unit.

  9. For more details on these decompositions, see Table 2.

  10. Contrary to bilateral exchange rates, an increase in effective exchange rates represents the appreciation of the local currency.

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Authors and Affiliations

  1. College of Business Administration, Northern Border University, Arar, KSA

    Mourad Zmami

  2. National Engineering School of Gabes, University of Gabes, Gabes, Tunisia

    Ousama Ben-Salha

  3. International Finance Group-Tunisia, University Tunis El Manar, Tunis, Tunisia

    Ousama Ben-Salha

Authors
  1. Mourad Zmami
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  2. Ousama Ben-Salha
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Correspondence to Ousama Ben-Salha.

Appendix

Appendix

See Table 12.

Table 12 Exports to output ratio in manufacturing industries (%)
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Zmami, M., Ben-Salha, O. Exchange rate movements and manufacturing employment in Tunisia: Do different categories of firms react similarly?. Econ Change Restruct 48, 137–167 (2015). https://doi.org/10.1007/s10644-015-9158-6

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