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"Beggar-thy-neighbor" or "beggar-thyself"? the income effect of exchange rate fluctuations

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Cedric Tille

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Abstract

This paper analyzes the impact of exchange rate fluctuations when they are only partially passed through to consumer prices. We show that an exchange rate depreciation does not necessarily have a beggar-thy-neighbor effect and may in fact have an opposite, or beggar-thyself, effect. The direction of the welfare effect depends on who owns the firms importing goods from producers and selling them to consumers, an issue that has not been explored in the earlier literature

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Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 112.

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Date of creation: 2000
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Handle: RePEc:fip:fednsr:112

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Related research
Keywords: Foreign exchange rates ; International trade ; Prices;

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  2. Michael B. Devereux & Charles Engel & CÈdric Tille, 2003. "Exchange Rate Pass-Through and the Welfare Effects of the Euro," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 223-242, February. [Downloadable!] (restricted)
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  3. Giancarlo Corsetti & Paolo Pesenti, 2001. "Welfare And Macroeconomic Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 421-445, May. [Downloadable!] (restricted)
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  4. Obstfeld, Maurice & Rogoff, Kenneth, 2000. "New directions for stochastic open economy models," Journal of International Economics, Elsevier, vol. 50(1), pages 117-153, February. [Downloadable!] (restricted)
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  5. John H. Rogers, 1998. "Monetary shocks and real exchange rates," International Finance Discussion Papers 612, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  6. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," CEPR Discussion Papers 1131, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Devereux, M. B., 2000. "How does a devaluation affect the current account?," Journal of International Money and Finance, Elsevier, vol. 19(6), pages 833-851, December. [Downloadable!] (restricted)
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  8. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-25, December. [Downloadable!] (restricted)
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  9. Marianne Baxter & Michael A. Kouparitsas, 2000. "What Causes Fluctuations in the Terms of Trade?," NBER Working Papers 7462, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Charles Engel & John H. Rogers, 2000. "Deviations from purchasing power parity: causes and welfare costs," International Finance Discussion Papers 666, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  11. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September. [Downloadable!] (restricted)
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  12. Jonathan McCarthy, 2000. "Pass-through of exchange rates and import prices to domestic inflation in some industrialized economies," Staff Reports 111, Federal Reserve Bank of New York. [Downloadable!]
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  13. Cedric Tille, 1999. "The role of consumption substitutability in the international transmission of shocks," Staff Reports 67, Federal Reserve Bank of New York. [Downloadable!]
  14. Engel, C., 1996. "Accounting for U.S. Real Exchange Rate Changes," Working Papers 96-02, University of Washington, Department of Economics.
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  15. Rotemberg, Julio J & Woodford, Michael, 1992. "Oligopolistic Pricing and the Effects of Aggregate Demand on Economic Activity," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1153-1207, December. [Downloadable!] (restricted)
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Maurice Obstfeld & Kenneth Rogoff, 2000. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," Center for International and Development Economics Research, Working Paper Series 1010, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  2. Paul Cavelaars, 2003. "The Impact of the Single Market on the Effectiveness of ECB Monetary Policy," DNB Staff Reports (discontinued) 104, Netherlands Central Bank. [Downloadable!]
  3. Linda Goldberg & Cedric Tille, 2006. "The internationalization of the dollar and trade balance adjustment," Staff Reports 255, Federal Reserve Bank of New York. [Downloadable!]
  4. Linda S. Goldberg & Cédric Tille, 2006. "The International Role of the Dollar and Trade Balance Adjustment," NBER Working Papers 12495, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Devereux, Michael B, 2001. "International Risk-Sharing and the Exchange Rate: Re-evaluating the Case for Flexible Exchange Rates," CEPR Discussion Papers 2900, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Charles Engel, 2002. "Expenditure Switching and Exchange Rate Policy," NBER Working Papers 9016, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. P. Cavelaars, 2001. "International Trade Costs, Home Bias and Europe's Single Markets," MEB Series (discontinued) 2001-8, Netherlands Central Bank, Monetary and Economic Policy Department.
  8. Lilia Cavallari, 2004. "Optimal monetary rules and internationalized production," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 175-186. [Downloadable!]
  9. Maurice Obstfeld & Kenneth Rogoff, 2001. "Global Implications of Self-Oriented National Monetary Rules," Center for International and Development Economics Research, Working Paper Series 1001, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley. [Downloadable!]
    Other versions:
  10. Duasa, Jarita, 2008. "Impact of exchange rate shock on prices of imports and exports," MPRA Paper 11624, University Library of Munich, Germany. [Downloadable!]
  11. Bergvall, Anders, 2002. "What Determines Real Exchange Rates? The Nordic Countries," Working Paper Series 2002:15, Uppsala University, Department of Economics. [Downloadable!]
  12. 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. [Downloadable!] (restricted)
  13. Maurice Obstfeld & Kenneth Rogoff, 2000. "Do We Really Need a New International Monetary Compact?," NBER Working Papers 7864, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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This page was last updated on 2009-11-18.

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