IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Effects of the Exchange-Rate Regime on Trade under Monetary Uncertainty: The Role of Price Setting

  • Alexander Mihailov

    ()

In a baseline stochastic new open-economy macroeconomics (NOEM) model which parallels alternative invoicing conventions, namely consumer's currency pricing (CCP) vs. producer's currency pricing (PCP), we revisit the question whether the exchange-rate regime matters for trade. We show analytically that under full symmetry, only money shocks and separable but otherwise very general utility, it is irrelevant in affecting expected trade-to-output ratios. A peg-float comparison is nevertheless meaningful under PCP, although not CCP, in terms of volatility of national trade shares: by shutting down the pass-through and expenditure-switching channel, a peg then stabilizes equilibrium trade-to-GDP at its expected level.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.essex.ac.uk/economics/discussion-papers/papers-text/dp566.pdf
Download Restriction: no

Paper provided by University of Essex, Department of Economics in its series Economics Discussion Papers with number 566.

as
in new window

Length:
Date of creation: 28 Oct 2003
Date of revision:
Handle: RePEc:esx:essedp:566
Contact details of provider: Postal: Wivenhoe Park, COLCHESTER. CO4 3SQ
Phone: +44-1206-872728
Fax: +44-1206-872724
Web page: http://www.essex.ac.uk/economics/

More information through EDIRC

Order Information: Postal: Discussion Papers Administrator, Department of Economics, University of Essex, Wivenhoe Park, Colchester CO4 3SQ, U.K.
Email:


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.:

as in new window
  1. Helpman, Elhanan, 1981. "An Exploration in the Theory of Exchange-Rate Regimes," Scholarly Articles 3445091, Harvard University Department of Economics.
  2. Maurice Obstfeld & Kenneth Rogoff, 1999. "New Directions for Stochastic Open Economy Models," NBER Working Papers 7313, National Bureau of Economic Research, Inc.
  3. Mankiw, N Gregory, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 529-38, May.
  4. Michael Magill & Martine Quinzii, 2002. "Theory of Incomplete Markets, Volume 1," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262632543, June.
  5. Betts, Caroline & Devereux, Michael B., 1996. "The exchange rate in a model of pricing-to-market," European Economic Review, Elsevier, vol. 40(3-5), pages 1007-1021, April.
  6. Maurice Obstfeld & Kenneth Rogoff, 1994. "Exchange Rate Dynamics Redux," NBER Working Papers 4693, National Bureau of Economic Research, Inc.
  7. Lane, Philip R., 2001. "The new open economy macroeconomics: a survey," Journal of International Economics, Elsevier, vol. 54(2), pages 235-266, August.
  8. 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.
  9. Hau, Harald, 2000. "Exchange rate determination: The role of factor price rigidities and nontradeables," Journal of International Economics, Elsevier, vol. 50(2), pages 421-447, April.
  10. Alexander Mihailov, 2004. "Effects of the exchange-rate regime on trade: the role of price setting," Money Macro and Finance (MMF) Research Group Conference 2003 66, Money Macro and Finance Research Group.
  11. Alexander Mihailov, 2004. "When and How Much Does a Peg Increase Trade? The Role of Trade Costs and Import Demand Elasticity under Monetary Uncertainty," Levine's Bibliography 122247000000000203, UCLA Department of Economics.
  12. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  13. Helpman, Elhanan & Razin, Assaf, 1984. "The role of saving and investment in exchange rate determination under alternative monetary mechanisms," Journal of Monetary Economics, Elsevier, vol. 13(3), pages 307-325, May.
  14. Magill, Michael & Shafer, Wayne, 1991. "Incomplete markets," Handbook of Mathematical Economics, in: W. Hildenbrand & H. Sonnenschein (ed.), Handbook of Mathematical Economics, edition 1, volume 4, chapter 30, pages 1523-1614 Elsevier.
  15. Maurice Obstfeld & Kenneth Rogoff, 1998. "Risk and Exchange Rates," NBER Working Papers 6694, National Bureau of Economic Research, Inc.
  16. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
  17. Michael B. Devereux, 1997. "Real Exchange Rates and Macroeconomics: Evidence and Theory," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 773-808, November.
  18. Sven W. Arndt & J. David Richardson, 1987. "Real-Financial Linkages Among Open Economies," NBER Working Papers 2230, National Bureau of Economic Research, Inc.
  19. Friberg, Richard, 1998. "In which currency should exporters set their prices?," Journal of International Economics, Elsevier, vol. 45(1), pages 59-76, June.
  20. Alexander Mihailov, 2004. "The Empirical Range of Pass-Through in US, German and Japanese Macrodata," Money Macro and Finance (MMF) Research Group Conference 2004 44, Money Macro and Finance Research Group.
  21. Feenstra, Robert C., 1986. "Functional equivalence between liquidity costs and the utility of money," Journal of Monetary Economics, Elsevier, vol. 17(2), pages 271-291, March.
  22. Helpman, Elhanan & Razin, Assaf, 1982. "A Comparison of Exchange Rate Regimes in the Presence of Imperfect Capital Markets," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(2), pages 365-88, June.
  23. Betts, Caroline & Devereux, Michael B., 2000. "Erratum to "Exchange rate dynamics in a model of pricing-to-market": [Journal of International Economics 50 (2000) 214-244]," Journal of International Economics, Elsevier, vol. 52(1), pages 207-208, October.
  24. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:esx:essedp:566. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Essex Economics Web Manager)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.