Trade Liberalization and Real Exchange Rate Movement
Although theory suggests that the real exchange rate should depreciate after a credible trade liberalization but could appreciate temporarily with a noncredible one, little empirical evidence exists. Unlike existing studies that use either indirect tests or unreliable openness measures, this paper uses an event study based on carefully documented trade liberalization in 45 countries. The result shows that real exchange rates depreciate after countries open their economies to trade. In countries with multiple liberalization episodes, however, real exchange rates appreciate during early episodes, suggesting that partial or noncredible trade liberalizations are associated with real appreciation.
|Date of creation:||01 Jun 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 623-7000
Fax: (202) 623-4661
Web page: http://www.imf.org/external/pubind.htm
More information through EDIRC
|Order Information:||Web: http://www.imf.org/external/pubs/pubs/ord_info.htm|
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.:
- Andriamananjara, Shuby & Nash, John, 1997. "Have trade policy reforms led to greater openness in developing countries : evidence from readily available trade data," Policy Research Working Paper Series 1730, The World Bank.
- Robert E. Baldwin, 1989. "Measuring Nontariff Trade Policies," NBER Working Papers 2978, National Bureau of Economic Research, Inc.
- Willett:, Thomas D., 1986. "Exchange-rate volatility, international trade, and resource allocation: A perspective on recent research," Journal of International Money and Finance, Elsevier, vol. 5(1, Supple), pages S101-S112, March.
- Calvo, Guillermo A. & Drazen, Allan, 1998. "Uncertain Duration Of Reform," Macroeconomic Dynamics, Cambridge University Press, vol. 2(04), pages 443-455, December.
- Gerwin Bell & M. ZÃ¼htÃ¼ YÃ¼celik & Paul Duran & Saleh M. Nsouli & Sena Eken, 1993. "The Path to Convertibility and Growth; The Tunisian Experience," IMF Occasional Papers 109, International Monetary Fund.
- Guillermo A. Calvo & Allan Drazen, 1997. "Uncertain Duration of Reform: Dynamic Implications," NBER Working Papers 5925, National Bureau of Economic Research, Inc.
- Edward E. Leamer, 1988.
"Measures of Openness,"
in: Trade Policy Issues and Empirical Analysis, pages 145-204
National Bureau of Economic Research, Inc.
- Khan, Mohsin S. & Ostry, Jonathan D., 1992. "Response of the equilibrium real exchange rate to real disturbances in developing countries," World Development, Elsevier, vol. 20(9), pages 1325-1334, September.
- Dani Rodrik, 1992. "The Limits of Trade Policy Reform in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 87-105, Winter.
When requesting a correction, please mention this item's handle: RePEc:imf:imfwpa:03/124. 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: (Jim Beardow)or (Hassan Zaidi)
If references are entirely missing, you can add them using this form.