Employment growth in the face of exchange rate uncertainty: The role of trade and foreign equity finance

This paper looks at the role of external trade and foreign equity finance in determining the impact of exchange rate uncertainty on firm-level employment growth in a major developing economy: India. Exchange rate uncertainty is found to affect firm-level employment growth adversely on average, but the impact depends upon firm-level characteristics such as exposure to foreign trade through imports and exports and firm-level mark-up. Foreign equity finance reduces the negative impact of exchange rate uncertainty on employment growth but the same cannot be said about access to domestic equity finance.