The Relationship Between Employment And Real Exchange Rate: The Case Of Turkish Apparel Industry

Abstract

This paper investigates the relationship between employment and real exchange rate in Turkish apparel industry. In particular, the relationship between employment and real exchange rate is sophisticated than it seems. It is widely accepted that there exists a link between real exchange rate and employment. However, the literature on this relation is insufficient and there is no consensus on whether real exchange rate has positive or negative effect on employment. Yet, we know that the sign and magnitude of this relation depend on various conditions, which ought to be analyzed in detail. We lay out an empirical model using employment, real wage, real exchange rate and production series of Turkish apparel industry. Our results indicate that there is a positive relationship between employment and real exchange rate in the long run.