Does the Exchange Rate Regime Affect Export Volumes? Evidence from Bilateral Exports in the US-UK trade: 1900-1998

By utilizing the techniques of multivariate cointegration and error correction models, we investigate the impact of the different exchange-rate regimes that spanned the 20th century on the bilateral exports between the UK and the US over the last 98 years. Our results support two conclusions. First, fixed exchange-rate regimes and managed float exchange-rate regimes are equally conducive to trade. Second, freely floating exchange-rate regimes are more conducive to trade than fixed exchange-rate regimes.