REAL EXCHANGE-RATE VARIABILITY AND JAPANESE INDUSTRIAL EMPLOYMENT

This paper studies the effects on employment of real exchange rate movements in Japan during the period 1973-1986 and compares them with similar effects for the United States. As expected, employment reacts to exchange rate fluctuations more sluggishly in Japan than in the United States in most of the industrial sectors considered. The rate of unemployment consistent with Williamson's fundamental exchange rates is only marginally higher than the observed rate and can be set close to 3% if there are no changes in policy rules. © 1990.