Unemployment and the real exchange rate in Latin America

SummaryToday unemployment rates in several Latin American countries are similar or even higher than the highest unemployment rates among OECD economies. Open unemployment has become, for the first time in the region’s history, a major dimension of the employment problem. This paper examines the role of the real exchange rate (RER) in the recent unemployment performance of Latin America. It presents a model of the determinants of unemployment, the channels through which the RER influences unemployment performance, as well as the stylized facts and empirical results about this relationship giving special attention to the cases of Argentina, Brazil, Chile, and Mexico.