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The Impact of Exchange Rate Regimes on Production Structures across Countries: The European Case

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  • Christian Aubin

    (University of Poitiers)

  • Camelia Turcu

    (University of Orleans)

Abstract

This paper analyzes the impact of exchange rate variability on the economic specialization of European countries. Two theoretical approaches are used: the first one, advanced by Krugman (1991), underlines that the monetary integration is favouring the specialization of countries members of an integrated area while the second one, supported by Ricci (1997), considers that the exchange rate variability is the one that is enhancing countries specialization. In line with these two theoretical dimensions, we conduct empirical estimations on the EU countries (1993-2008) using two different measures of specialization. The results give a mixed picture: the link between specialization and exchange rate regimes is found to be significant but its sign differs according to the sectors desegregation. In order to conciliate these results with the two challenging theoretical settings, we propose an explanation based on the difference between inter-industry and intra-industry specialization.

Suggested Citation

  • Christian Aubin & Camelia Turcu, 2014. "The Impact of Exchange Rate Regimes on Production Structures across Countries: The European Case," Working Papers 2014.05, International Network for Economic Research - INFER.
    • Handle: RePEc:inf:wpaper:2014.05
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    References listed on IDEAS

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