Fixed exchange rates and trade
By: Michael W. Klein, Jay C. Shambaugh.
Contributors: Shambaugh, Jay C.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10696; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10696.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Foreign exchange rates.; Foreign trade promotion.
Description: "A classic argument for a fixed exchange rate is its promotion of trade.  Empirical support for this, however, is mixed.  While one branch of research consistently shows a small negative effect of exchange rate volatility on trade, another, more recent, branch presents evidence of a large positive impact of currency unions on trade.  This paper helps resolve this disconnect.  Our results, which use a new data-based classification of fixed exchange rate regimes, show a large, significant effect of a fixed exchange rate on bilateral trade between a base country and a country that pegs to it.  Furthermore, the web of fixed exchange rates created when countries link to a common base also promotes trade, but only when these countries are part of a wider system, as during the Bretton Woods period.  These results suggest an economically relevant role for exchange rate regimes in trade determination since a significant amount of world trade is conducted between countries with fixed exchange rates"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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Mode of access: World Wide Web.