Exchange Rate Regimes and Trade Prices: Does the EMS Matter?
AbstractThis paper investigates the role of the exchange rate regime in the process of trade adjustment, by examining the relationship between trade prices and exchange rate regimes. The theoretical framework is a dynamic one à la Froot-Klemperer (1989). The empirical investigation takes advantage of the simultaneous occurrence, since 1979, of relatively stable exchange rates inside the ERM and instable rates outside to engage in a controlled experiment on the impact of the exchange rate regime on trade prices. The results suggest that a system of pegged rates like the EMS, although helpful, is not necessary to achieve a smooth process of trade adjustment. It appears that the absence of misalignment rather than the type of exchange rate regime is the crucial factor for fulfilling such an objective.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 810.
Date of creation: Aug 1993
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Other versions of this item:
- Sapir, Andre & Sekkat, Khalid, 1995. "Exchange rate regimes and trade prices Does the EMS matter?," Journal of International Economics, Elsevier, vol. 38(1-2), pages 75-94, February.
- André Sapir & Khalid Sekkat, 1995. "Exchange rate regimes and trade prices: does the EMS matter?," ULB Institutional Repository 2013/8170, ULB -- Universite Libre de Bruxelles.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F31 - International Economics - - International Finance - - - Foreign Exchange
- L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
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