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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. 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.
  2. Michael B. Devereux & Charles Engel, 2000. "Monetary Policy in the Open Economy Revisited: Price Setting and Exchange Rate Flexibility," Working Papers 042000, Hong Kong Institute for Monetary Research.
  3. Maurice Obstfeld and Kenneth Rogoff., 1999. "New Directions for Stochastic Open Economy Models," Center for International and Development Economics Research (CIDER) Working Papers, University of California at Berkeley C99-107, University of California at Berkeley.
  4. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," CEPR Discussion Papers 1131, C.E.P.R. Discussion Papers.
  5. Corsetti, Giancarlo & Pesenti, Paolo, 2005. "International dimensions of optimal monetary policy," Journal of Monetary Economics, Elsevier, Elsevier, vol. 52(2), pages 281-305, March.
  6. Luca Antonio Ricci, 1997. "Exchange Rate Regimes and Location," IMF Working Papers 97/69, International Monetary Fund.
  7. Giancarlo Corsetti & Paolo Pesenti, 2001. "Welfare And Macroeconomic Interdependence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 116(2), pages 421-445, May.
  8. Faruqee, Hamid, 1996. "Real exchange rates and the pattern of trade: comparative dynamics for north and south," Journal of International Money and Finance, Elsevier, Elsevier, vol. 15(2), pages 313-336, April.
  9. John H. Rogers, 1998. "Monetary shocks and real exchange rates," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 612, Board of Governors of the Federal Reserve System (U.S.).
  10. 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.
  11. V.V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?," NBER Working Papers 7869, National Bureau of Economic Research, Inc.
  12. Michael Devereux & Charles Engel & Cedric Tille, 1999. "Exchange-Rate Pass-Through and the Welfare Effects of the Euro," Working Papers 0034, University of Washington, Department of Economics.
  13. David Bowman & Brian M. Doyle, 2003. "New Keynesian, open-economy models and their implications for monetary policy," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 762, Board of Governors of the Federal Reserve System (U.S.).
  14. Cedric Tille, 1999. "The role of consumption substitutability in the international transmission of shocks," Staff Reports 67, Federal Reserve Bank of New York.
  15. 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.
  16. José Manuel Campa & Linda S. Goldberg, 1999. "Employment versus Wage Adjustment and the U.S. Dollar," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 99-07, New York University, Leonard N. Stern School of Business, Department of Economics.
  17. Maurice Obstfeld & Kenneth Rogoff, 2000. "Do We Really Need a New International Monetary Compact?," NBER Working Papers 7864, National Bureau of Economic Research, Inc.
  18. Lane, P, 1999. "The New Open Economy Macroeconomics: A Survey," Trinity Economics Papers, Trinity College Dublin, Department of Economics 993, Trinity College Dublin, Department of Economics.
  19. Maurice Obstfeld & Kenneth S. Rogoff, 1996. "Foundations of International Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262150476, December.
  20. Linda Goldberg & Joseph Tracy, 2001. "Exchange Rates and Wages," NBER Working Papers 8137, National Bureau of Economic Research, Inc.
  21. 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.
  22. 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.
  23. Benigno, Gianluca & Benigno, Pierpaolo, 2001. "Monetary Policy Rules and the Exchange Rate," CEPR Discussion Papers 2807, C.E.P.R. Discussion Papers.
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Cited by:
  1. William Craighead, 2012. "Specific Factors and International Monetary Policy Coordination," Open Economies Review, Springer, vol. 23(2), pages 319-336, April.
  2. P. Bacchetta & E. van Wincoop, 2002. "A Theory of the Currency Denomination of International Trade," DNB Staff Reports (discontinued) 75, Netherlands Central 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. Weber, Sebastian & Wyplosz, Charles, 2009. "Exchange rates during the crisis," Policy Research Working Paper Series 5059, The World Bank.

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