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- Title
EXCHANGE RATE REGIMES AND TRADE.
- Authors
ADAM, CHRISTOPHER; COBHAM, DAVID
- Abstract
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.
- Subjects
FOREIGN exchange rates; INTERNATIONAL trade; MONETARY policy; INTERNATIONAL economic integration; INTERNATIONAL finance; EXPORT subsidies; INTERNATIONAL markets; MONETARY unions; MACROECONOMICS
- Publication
Manchester School (1463-6786), 2007, Vol 75, p44
- ISSN
1463-6786
- Publication type
Article
- DOI
10.1111/j.1467-9957.2007.01037.x