Does Exchange Rate Stability Increase Trade and Welfare?

Détails

ID Serval
serval:BIB_453986FC66C8
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Titre
Does Exchange Rate Stability Increase Trade and Welfare?
Périodique
American Economic Review
Auteur(s)
Bacchetta P., van Wincoop E.
ISSN
0002-8282
Statut éditorial
Publié
Date de publication
2000
Peer-reviewed
Oui
Volume
90
Numéro
5
Pages
1093-1109
Langue
anglais
Résumé
We develop a simple general equilibrium framework to study the effect of the exchange rate system on trade and welfare. An important feature of the model is deviations from purchasing power parity, caused by rigid price setting in buyers' currency. We find the following. First, exchange rate stability is not necessarily associated with more trade.In a simple benchmark model with separable preferences and only monetary shocks, trade is unaffected by the exchange rate system, consistent with most evidence. Second, both trade and welfare can be higher under either exchange rate system, depending on preferences and on the monetary policy rules followed under each system. Finally, in general there is no one-to-one relationship between the levels of trade and welfare across exchange rate systems.
Mots-clé
Exchange rate volatility, Exchange rate regime
Web of science
Création de la notice
19/11/2007 11:24
Dernière modification de la notice
03/03/2018 16:45
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