Trade Costs and Real Exchange Rate Volatility : The Role of Ricardian Comparative Advantage.

Format:

Book

Government document

Author/Creator:

International Monetary Fund.

Contributor:

International Monetary Fund. Research Department.

Series:

IMF Working Papers; Working Paper ; No. 2005/005

IMF Working Papers

Language:

English

Subjects (All):

Foreign exchange rates--Econometric models.

Foreign exchange rates.

Comparative advantage (International trade)--Econometric models.

Comparative advantage (International trade).

Physical Description:

1 online resource (44 p.)

Edition:

1st ed.

Place of Publication:

Washington, D.C. : International Monetary Fund, 2005.

Language Note:

English

Summary:

This paper examines the impact of trade costs on real exchange rate volatility. We incorporate a multi-country Ricardian model of trade, based on the work of Eaton and Kortum (2002), into a macroeconomic model to show how bilateral real exchange rate volatility depends on relative technological differences and trade costs. These differences highlight a new channel, in which the similarity of a pair of countries' set of suppliers of traded goods affects bilateral exchange rate volatility. We then test the importance of this channel using a large panel of cross-country data over 1970-97, and find strong evidence supporting the channel.

Contents:

""Trade Costs and Real Exchange Rate Volatility: The Role of Ricardian Comparative Advantage""; ""Contents""; ""I. INTRODUCTION""; ""II. MULTI-COUNTRY MODEL""; ""III. EXAMPLE""; ""IV. EMPIRICAL EVIDENCE""; ""V. CONCLUSION""; ""APPENDIX MULTI-COUNTRY REAL EXCHANGE RATE VOLATILITY""; ""REFERENCES""

Notes:

"January 2005."

Includes bibliographical references (p. 41-43).

Description based on print version record.

ISBN:

9786613801913

9781462368006

146236800X

9781452769349

1452769346

9781282108561

1282108565

9781451905601

1451905602

OCLC:

535146978