EXCHANGE RATE REGIMES AND TRADE

Christopher Adam () and David Cobham

Manchester School, 2007, vol. 75, issue s1, pages 44-63

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. Copyright © 2007 The Authors; Journal compilation © 2007 Blackwell Publishing Ltd and The University of Manchester.

Date: 2007
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Related works:
Working Paper: Exchange rate regimes and trade (2007)
Working Paper: Exchange Rate Regimes and Trade (2005)
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