Transmission of nominal exchange rate changes to export prices and trade flows and implications for exchange rate policy

Mathias Hoffmann () and Oliver Holtemöller

No 2009,21, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: We discuss how the welfare ranking of fixed and flexible exchange rate regimes in a New Open Economy Macroeconomics model depends on the interplay between the degree of exchange rate pass-through and the elasticity of substitution between home and foreign goods. We identify combinations of these two parameters for which flexible and for which fixed exchange rates are superior with respect to welfare as measured by a representative household's utility level. We estimate the two parameters for six non-EMU European countries (Czech Republic, Hungary, Poland, Slovakia, Sweden, United Kingdom) using a heterogeneous dynamic panel approach.

Keywords: Elasticity of substitution between home and foreign goods; exchange rate pass-through; exchange rate regime choice; expenditure switching effect; heterogeneous dynamic panel; New Open Economy Macroeconomics (search for similar items in EconPapers)
JEL-codes: F14 F31 F41 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mon, nep-opm and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Transmission of Nominal Exchange Rate Changes to Export Prices and Trade Flows and Implications for Exchange Rate Policy* (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:200921

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