REAL EFFECTIVE EXCHANGE RATE AND UNEMPLOYMENT RATE: THE DIFFERENCE BETWEEN RE-EXPORTING AND NON-RE-EXPORTING COUNTRIES

In this paper, I examine the relationship between unemployment rate and real effective exchange rate in several countries from 1994 to 2009. The analysis shows that most of countries have a negative relationship between those two factors, which implies increase of exchange rate can improve employment rate in an economy. However, re-exporting countries like the Netherlands, Singapore and Hong Kong has a less negative relationship than other countries. I hypothesize that those results are caused by the different elasticity of demand for imports