The effect of exchange rate volatility on trade flows was examined by a 1984 IMF study on G-7 countries. Over the past two decades, many developments in the world economy, such as the currency crises in the 1990s and increasing cross-border capital flows, may have exacerbated exchange rate...

This Selected Issues paper describes the recent economic developments in The Gambia. The paper highlights that the economic performance of The Gambia deteriorated sharply in 2002, as sparse rainfall led to a decline of one-third in agricultural output. Real GDP shrank by 3 percent. However,...

In this paper we develop a two-country dynamic general equilibrium model by means of which we seek to explain the long-run paths of a converging emerging market economy. We borrow a paradigm from the New Open Economy Macroeconomics literature and amend it to address specific features such as...

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...

This paper examines the dynamic relationship between trade and income. While most economists agree that increased trade leads to an increase in average income, economic theory is ambiguous about the possible effects on the long-run growth rate of the economy. Using a dynamic panel data model,...

The role of exchange rate flexibility in the periphery of the gold standard has been grossly overlooked. This paper builds a new dataset on trade-weighed exchange rates for the period 1870-1913 and finds that large currency movements in periphery countries operating inconvertible paper-money and...

China’s transformation into a dynamic private-sector-led economy and its integration into the world economy have been among the most dramatic global economic developments of recent decades. This paper provides an overview of some of the key aspects of recent developments in China’s...

Central America has received growing attention as a region that is integrating successfully into the global economy. This paper examines—among other things—the macroeconomic and fiscal implications of the Free Trade Agreement with the United States (CAFTA-DR), noting that the...

This report discusses major developments in the Lao People’s Democratic Republic (PDR), and updates the statistical tables on recent economic developments and provides an overview of the real sector. Factors that have limited revenue collections and developments in the monetary and...

This paper provides a framework for understanding trade patterns in the Mashreq. An augmented gravity model is used to compare actual with expected levels of trade. Trade barriers, political uncertainty, and over-appreciation of domestic currencies seem to explain low levels of international...