Exchange Rate Regimes and Trade

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.

Tourism and Economic Growth: A Meta-regression Analysis

“…Therefore, beyond the theoretical arguments of such an endeavor, the inclusion of exchange rate in a tourism-economic growth model is necessary to reduce bias in the estimates (Solarin 2018). Furthermore, it may also be of value for researchers to extend this analysis by accounting not only for exchange rate, but also for exchange rate regimes as a control variable in studies on the TLGH given their effects on trade (Adam and Cobham 2007), price levels (Broda 2006), foreign direct investment (Abbott, Cushman, and De Vita 2012), and tourism demand (De Vita 2014).…”

Does Monetary Policy Matter for Trade?

“…The influential work of Rose (2000) and other subsequent studies of Rose and Van Wincoop (2001a), Glick and Rose (2002) and Frankel and Rose (2002) show that there is a strong positive effect of a common currency on trade. This conclusion is supported by Klein and Shambaugh (2006) and Adam and Cobham (2007) using more detailed classifications on exchange rate systems. In addition, Klein and Shambaugh (2006) find that a fixed exchange rate in other more general forms also expands trade.…”

A comprehensive classification of monetary policy frameworks in advanced and emerging economies

“…A second example is the research by Frappa and Mésonnier (2011) which investigated whether asset price volatility was higher under inflation targeting. A third example is work on the impact of exchange rate regimes on international trade in gravity models, where it would be useful to investigate the effects on trade of monetary policy frameworks overall rather than just currency unions (as in Rose, 2000) or even a wider menu of exchange rate regimes (as in Adam and Cobham, 2007); this might, for example, shed additional light on the Calvo and Mishkin (2003) argument for policymakers to focus on financial, fiscal and monetary institutions rather than just exchange rate regimes. A fourth example is work on the determinants of countries' choices of exchange rate regimes, e.g.…”