published in: German Economic Review, 2005, 6 (2), 185-203
In a baseline micro model a band of inaction due to hiring- and firing-costs is widened by
option value effects of exchange rate uncertainty. Based on this micro foundation an
aggregation approach is presented. Under uncertainty, intervals of weak response to
exchange rate reversals (called 'play' areas) are introduced on the macro-level. 'Spurts' in
new employment or firing may occur after an initially weak response. Since these
mechanisms may apply to other "investment" cases where the aggregation of microeconomic
real options effects under uncertainty are relevant, they may even be of a more general
interest.
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