The Effects of Interest Rate and Exchange Rate Risks on Unemployment
碩士 === 中原大學 === 國際貿易研究所 === 90 === When the rate of return on an individual’s savings is risky, the access to a labor market to work for a riskless wage provides a means of hedging this capital income risk by working more. In a non-expected utility maximizing framework using Selden’s OCE preference...
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| Format: | Others |
| Language: | zh-TW |
| Published: |
2002
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| Online Access: | http://ndltd.ncl.edu.tw/handle/39031374174807651660 |
| Summary: | 碩士 === 中原大學 === 國際貿易研究所 === 90 === When the rate of return on an individual’s savings is risky, the access to a labor market to work for a riskless wage provides a means of hedging this capital income risk by working more. In a non-expected utility maximizing framework using Selden’s OCE preference we investigate the effects of a change in the rate of return risk or the exchange rate of return risk on such precautionary labor supply decision. It is shown that an increase in the rate of return risk or the exchange rate of return risk leads to an increase (a decrease) in the optimal labor supply only when the elasticity of intertemporal substitution for consumption falls short of (exceeds) unity. An OLS regression of unemployment rate on interest rate and exchange rate risks is clearly problematic because of omitted-variables’ bias due to the exclusion of important macroeconomic variables influencing aggregate unemployment rate. So we use the fixed Layard-Nickell model.
An empirical analysis, using a GARCH model to estimate the interest rate risk; using the two stage least square approach to estimate the fixed Layard-Nickell model, reveals that in the Taiwan, unemployment rate has responded positively to an decrease in time-varying real interest rate risk.
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