Exchange Rate Regimes, Specialization and Trave Volume

Michael Devereux and Graham Voss

No 222004, Working Papers from Hong Kong Institute for Monetary Research

Abstract: We develop a general equilibrium monetary model of endogenous specialization and international trade to examine the degree of specialization and trade volume under alternative exchange rate regimes. Where demand shocks are important, we demonstrate an increase in specialization, trade and welfare under coordinated fixed exchange rates, equivalent to a common currency, relative to flexible exchange rates. Where supply shocks are important, the effects on specialization and trade are smaller and ambiguous in direction, though the welfare effects are comparable to those for demand shocks.

Keywords: Exchange Rates; Common Currency Internaional Trade (search for similar items in EconPapers)
JEL-codes: E42 F33 F42 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2004-11
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Journal Article: Exchange Rate Regimes, Specialization and Trade Volume (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hkm:wpaper:222004

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