Exchange Rates as Trade Frictions: Estimates and Implications for Policy

James Anderson and Praveen Saini

No 29428, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper improves on current treatment of exchange rate variation in quantitative trade models. Exchange rate changes with heterogeneous passthrough to buyers are embedded in the structural gravity model. Quantification on two digit annual bilateral trade data reveals real effects of exchange rate changes on producers that are substantial for some country-sector-time period observations. Real national income effects are small but not always negligible. Effective exchange Rates with Gravitas (ERGs) are introduced as theory-consistent indexes to guide potential policy remedies.

JEL-codes: F1 F13 F14 F3 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-int and nep-opm
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