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On the distributional effects of exchange rate fluctuations

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  • Tille, Cedric

Abstract

The paper studies the differential impact of exchange rate fluctuations on households in a country. I extend earlier research by relaxing the assumption of complete international sectoral specialization. My setup allows for the presence of several different sectors in a given country, each producing a different type of good. Combined with incomplete asset markets, the sectoral dimension leads to a heterogeneous impact of exchange rate fluctuation within each country. In particular, although a depreciation of a country's currency has an adverse 'beggar-thyself' effect for the country as a whole, a minority of households benefit.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 25 (2006)
Issue (Month): 8 (December)
Pages: 1207-1225

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Handle: RePEc:eee:jimfin:v:25:y:2006:i:8:p:1207-1225

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Web page: http://www.elsevier.com/locate/inca/30443

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References

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  1. Giancarlo Corsetti & Paolo Pesenti, 2001. "International Dimensions of Optimal Monetary Policy," NBER Working Papers 8230, National Bureau of Economic Research, Inc.
  2. V. V Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 533-563.
  3. Tille, Cedric, 2001. "The role of consumption substitutability in the international transmission of monetary shocks," Journal of International Economics, Elsevier, vol. 53(2), pages 421-444, April.
  4. Faruqee, Hamid, 1996. "Real exchange rates and the pattern of trade: comparative dynamics for north and south," Journal of International Money and Finance, Elsevier, vol. 15(2), pages 313-336, April.
  5. Michael B. Devereux & Charles Engel & Cedric Tille, 1999. "Exchange Rate Pass-Through and the Welfare Effects of the Euro," NBER Working Papers 7382, National Bureau of Economic Research, Inc.
  6. Cedric Tille, 1999. "The role of consumption substitutability in the international transmission of shocks," Staff Reports 67, Federal Reserve Bank of New York.
  7. Lane, Philip R., 1999. "The New Open Economy Macroeconomics: a Survey," CEPR Discussion Papers 2115, C.E.P.R. Discussion Papers.
  8. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
  9. Giancarlo Corsetti & Paolo Pesenti, 1997. "Welfare and Macroeconomic Interdependence," NBER Working Papers 6307, National Bureau of Economic Research, Inc.
  10. Maurice Obstfeld & Kenneth Rogoff, 1994. "Exchange Rate Dynamics Redux," NBER Working Papers 4693, National Bureau of Economic Research, Inc.
  11. Michael B. Devereux & Charles Engel, 2003. "Monetary Policy in the Open Economy Revisited: Price Setting and Exchange-Rate Flexibility," Review of Economic Studies, Oxford University Press, vol. 70(4), pages 765-783.
  12. Devereux, Michael B & Engel, Charles M, 2000. "Monetary Policy In The Open Economy Revisited: Price Setting Rules And Exchange Rate Flexibility," CEPR Discussion Papers 2454, C.E.P.R. Discussion Papers.
  13. Rogers, John H., 1999. "Monetary shocks and real exchange rates," Journal of International Economics, Elsevier, vol. 49(2), pages 269-288, December.
  14. Obstfeld, Maurice & Rogoff, Kenneth, 1999. "New Directions for Stochastic Open Economy Models," Center for International and Development Economics Research, Working Paper Series qt5pf7g8sh, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  15. Jose Manuel Campa & Linda S. Goldberg, 2001. "Employment Versus Wage Adjustment And The U.S. Dollar," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 477-489, August.
  16. Benigno, Gianluca & Benigno, Pierpaolo, 2001. "Monetary Policy Rules and the Exchange Rate," CEPR Discussion Papers 2807, C.E.P.R. Discussion Papers.
  17. Linda Goldberg & Joseph Tracy, 2001. "Exchange Rates and Wages," NBER Working Papers 8137, National Bureau of Economic Research, Inc.
  18. Pierre-Olivier Gourinchas, 1998. "Exchange Rates and Jobs: What Do We Learn from Job Flows?," NBER Working Papers 6864, National Bureau of Economic Research, Inc.
  19. Betts, Caroline & Devereux, Michael B., 2000. "Exchange rate dynamics in a model of pricing-to-market," Journal of International Economics, Elsevier, vol. 50(1), pages 215-244, February.
  20. David Bowman & Brian M. Doyle, 2003. "New Keynesian, open-economy models and their implications for monetary policy," International Finance Discussion Papers 762, Board of Governors of the Federal Reserve System (U.S.).
  21. Charles Engel, 2002. "The Responsiveness of Consumer Prices to Exchange Rates And the Implications for Exchange-Rate Policy: A Survey Of a Few Recent New Open-Economy..," NBER Working Papers 8725, National Bureau of Economic Research, Inc.
  22. Luca Antonio Ricci, 1997. "Exchange Rate Regimes and Location," IMF Working Papers 97/69, International Monetary Fund.
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Cited by:
  1. Philippe Bacchetta & Eric van Wincoop, 2001. "A Theory of the Currency Denomination of International Trade," Working Papers 01.07, Swiss National Bank, Study Center Gerzensee.
  2. Weber, Sebastian & Wyplosz, Charles, 2009. "Exchange rates during the crisis," Policy Research Working Paper Series 5059, The World Bank.
  3. Cedric Tille, 2002. "How valuable is exchange rate flexibility? Optimal monetary policy under sectoral shocks," Staff Reports 147, Federal Reserve Bank of New York.
  4. William Craighead, 2012. "Specific Factors and International Monetary Policy Coordination," Open Economies Review, Springer, vol. 23(2), pages 319-336, April.

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