affecting UK labour market conditions. When the real exchange rate is undervalued, short-run unemployment falls as firms respond … to an improvement in domestic competitiveness by increasing their demand for labour. The unemployment response to the … reflects monetary policy considerations, our results imply that unemployment can be targeted by economic policy. Our results …

unemployment vary both with large versus small real exchange rate disequilibria and rising versus falling unemployment regimes. The … adjustment in periods of falling unemployment. This implies that prices and wages are more flexible when real output is high … demanding and getting higher wages. Unemployment is reduced following gains in competitiveness when the real exchange rate is …