This paper examines the impact of exchange rate regimes on bilateral trade while differentiating the effects of "words" and "deeds". Our findings-based on an extended database for de jure and de facto exchange rate classifications-show that while fixed exchange rate regimes increase trade, there...

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...

This study assesses the experience of the Common Monetary Area (CMA) based on available empirical evidence over the last two decades. It pays particular attention to member countries' adjustment to economic shocks in recent years and the inter-country linkages, including the spillover effects of...

This paper explores the effectiveness of the Central European Free Trade Area (CEFTA) and the Baltic Free Trade Area (BFTA). Estimates from a gravity model and bilateral trade data support the view that both CEFTA and BFTA helped expand regional trade and limit the emergence of a "hub-and-spoke"...

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...

This paper examines the effect of the major Canada-U.S. trade agreements on the dynamics of business cycles and productivity in Canada. The North American Free Trade Agreement (NAFTA) and its predecessor, the Canada-U.S. Free Trade Agreement (CUSFTA), have led to a substantial expansion of trade...

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...