On the Distributional Effects of Exchange Rate Fluctuations
33 Pages Posted: 31 Jul 2006
Date Written: March 2002
Abstract
The paper studies the differential impact of exchange rate fluctuations on households in a country. I extend earlier research by relaxing the assumption of complete international sectoral specialization. My setup allows for the presence of several different sectors in a given country, each producing a different type of good. Combined with incomplete asset markets, the sectoral dimension leads to a heterogenous impact of exchange rate fluctuation within each country. In particular, although a depreciation of a country's currency has an adverse "beggar-thyself" effect for the country as a whole, a minority of households benefit.
Keywords: welfare, exchange rate fluctuations, international competitiveness
JEL Classification: F31, F41, F42
Suggested Citation: Suggested Citation
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