This paper investigates the effects of fixed versus flexible exchange rates on firms` location choices and on countries` specialization patterns. In a two-country, two-differentiated-goods monetary model, demand, supply, and monetary (as well as exchange rate) shocks arise after wages are set...

This paper uses a three-country, three-good, factor-specific model of trade with wage rigidities to investigate how European Monetary Union (EMU) is likely to affect exchange rate variability. Focusing on international macroeconomic adjustment under both exogenous and optimizing monetary...

This paper shows that exchange rate variability promotes agglomeration of economic activity. Under flexible rates, firms located in large markets have lower variability of sales, reinforcing concentration of firms there. Empirical evidence on OECD countries demonstrates (1) that the negative...

The paper examines factors affecting exchange rate volatility, with an emphasis on structural features of the foreign exchange regime. It draws for the first time on detailed survey data collected by the IMF on foreign exchange market organization and regulations. Key findings are that...

This paper shows that exchange rate volatility promotes agglomeration of economic activity. Under flexible rates, firms prefer to locate in large countries, where they would enjoy lower variability of sales, thus reinforcing concentration of firms in such locations. Empirical evidence on OECD...

The present study focuses on the impact of the euro/dollar fluctuations on the European manufacturing industries. It tries to classify European sectors according to the exposure to competition from the dollar zone and to their sensitivity to exchange rate fluctuations. Combining the results of...

This paper investigates the effect of domestic and global uncertainty on the volatility of the Mexican peso US dollar exchange rate during the period January 1999 - July 2018. The analysis is performed in two stages. In the first stage, we derive an exchange rate volatility measure by estimating...

I adopt the simple model of the law of comparative advantage which still holds up today but often is regarded as oversimplified or invalid in the modern world. The reason I use this version is the presence of money which serves only as a medium of exchange and an accounting unit i.e. countries...

This paper addresses the central open issue in exchange rate economics: the link between exchange rate volatility and economic fundamentals. In the framework of a multivariate volatility model that allows for volatility spillover, we develop a new impulse response analysis to estimate and...

This paper develops a model of the circumstances under which it is beneficial to participate in a currency area. The proposed two-country monetary model of trade with nominal rigidities encompasses the real and monetary arguments suggested by the optimum currency area literature: correlation of...