Transmission of Nominal Exchange Rate Changes to Export Prices and Trade Flows and Implications for Exchange Rate Policy*

Mathias Hoffmann () and Oliver Holtemöller

Scandinavian Journal of Economics, 2010, vol. 112, issue 1, 127-161

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 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, and the UK) using a heterogeneous dynamic panel approach.

Date: 2010
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https://doi.org/10.1111/j.1467-9442.2009.01597.x

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Working Paper: Transmission of nominal exchange rate changes to export prices and trade flows and implications for exchange rate policy (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:scandj:v:112:y:2010:i:1:p:127-161

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