A Bank of Israel study found that the shekel's strength affects sectors with many employees.
"In view of the central bank's difficulty in continuing support of the nominal exchange rate, let alone the real exchange rate, other non-monetary policy methods ought to be considered that will make it easier for economic sectors, especially labor intensive sectors, to deal with the shekel's appreciation, which is the result of favorable background economic conditions," says Bank Leumi chief economist Gil Bafman in the bank's weekly market survey.
The bank adds that a Bank of Israel analysis from 2008 found that while the real exchange rate has no clear effect on high-tech exports, in the case of mixed technology industries (i.e. mid and low technology) there is clear statistical significance. These are labor intensive industries, which, if harmed, have a magnified impact on the labor market.
Published by Globes [online], Israel business news - www.globes-online.com - on January 14, 2010
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