EXCHANGE RATE REGIMES AND TRADE
A 'new version' of the gravity model is used to estimate the effect of a full range of de facto exchange rate regimes on bilateral trade. The results indicate that, while participation in a common currency union is typically strongly 'pro-trade', other exchange rate regimes which lower the exchange rate uncertainty and transactions costs associated with international trade are significantly more pro-trade than the default regime of a 'double float'. They suggest that the direct and indirect trade-creating effects of these regimes on uncertainty and transactions costs tend to outweigh the trade-diverting substitution effects. Tariff-equivalent monetary barriers associated with each exchange rate regime are also calculated. Copyright © 2007 The Authors; Journal compilation © 2007 Blackwell Publishing Ltd and The University of Manchester.
Year of publication: |
2007
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Authors: | ADAM, CHRISTOPHER ; COBHAM, DAVID |
Published in: |
Manchester School. - School of Economics, ISSN 1463-6786. - Vol. 75.2007, s1, p. 44-63
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Publisher: |
School of Economics |
Saved in:
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