Exchange Rate Regimes and Trade
A 'new version' gravity model is used to estimate the effect of de facto exchange rate regimes, as classified by Reinhart and Rogoff (2004), on bilateral trade. The results indicate that, while participation in a common currency union is typically strongly 'protrade' - as first suggested by Rose (2000) - other exchange rate regimes which lower the exchange rate uncertainty and transactions costs associated with international trade between countries are significantly more pro-trade than the default regime of a 'double float'. They suggest that the direct and indirect effects of exchange rate regimes on uncertainty and transactions costs tend to outweigh the trade-diverting substitution effects. In addition, there is evidence that membership of different currency unions by two countries has pro-trade effects, which can be understood in terms of a large indirect effect on transactions costs. Tariff-equivalent monetary barriers associated with each of the exchange rate regimes are also calculated.
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- Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2003. "Exchange Rate Regimes: Choices and Consequences," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072408, June.
- James E. Anderson & Eric van Wincoop, 2003.
"Gravity with Gravitas: A Solution to the Border Puzzle,"
American Economic Review,
American Economic Association, vol. 93(1), pages 170-192, March.
- James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
- James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
- Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
- Husain, Aasim M. & Mody, Ashoka & Rogoff, Kenneth S., 2005. "Exchange rate regime durability and performance in developing versus advanced economies," Journal of Monetary Economics, Elsevier, vol. 52(1), pages 35-64, January.
- Jeffrey Frankel & Andrew Rose, 2002. "An Estimate of the Effect of Common Currencies on Trade and Income," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 437-466.
- Reinhart, Carmen, 2002.
"A Modern History of Exchange Rate Arrangements: Parallel Markets and Dual and Multiple Exchange Rates,"
13194, University Library of Munich, Germany.
- Reinhart, Carmen, 2002. "A Modern History of Exchange Rate Arrangements: Chartbook, 1946-2001," MPRA Paper 13192, University Library of Munich, Germany.
- Reinhart, Carmen, 2002. "A Modern History of Exchange Rate Arrangements: The Country Histories, 1946-2001," MPRA Paper 13191, University Library of Munich, Germany.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 1-48.
- Andrew K. Rose, 2001. "Currency unions and trade: the effect is large," Economic Policy, CEPR;CES;MSH, vol. 16(33), pages 449-461, October.
- Emilia Magdalena Jurzyk & Bernhard Fritz-Krockow, 2004. "Will You Buy My Peg? the Credibility of a Fixed Exchange Rate Regime As a Determinant of Bilateral Trade," IMF Working Papers 04/165, International Monetary Fund.
- Andrew K. Rose & Eric van Wincoop, 2001. "National Money as a Barrier to International Trade: The Real Case for Currency Union," American Economic Review, American Economic Association, vol. 91(2), pages 386-390, May.
- Rose, Andrew K, 2003.
"Which International Institutions Promote International Trade?,"
CEPR Discussion Papers
3764, C.E.P.R. Discussion Papers.
- Andrew Rose, 2005. "Which International Institutions Promote International Trade?," Review of International Economics, Wiley Blackwell, vol. 13(4), pages 682-698, 09.
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