Currency Wars? Unconventional Monetary Policy Does Not Stimulate Exports

31 Pages Posted: 16 Jul 2018 Last revised: 24 Apr 2022

See all articles by Andrew Kenan Rose

Andrew Kenan Rose

University of California - Haas School of Business; NUS Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

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Date Written: July 2018

Abstract

I investigate whether countries that use unconventional monetary policy (UMP) experience export booms. I use a popular gravity model of trade which requires neither the exogeneity of UMP, nor instrumental variables for UMP. In practice, countries that engage in UMP experience a drop in exports vis-á-vis countries that are not engaged in such policies, holding other things constant. Quantitative easing is associated with exports that are about 10% lower to countries not engaged in UMP; this amount is significantly different from zero and similar to the effect of negative nominal interest rates. Thus, there is no evidence that countries have gained export markets through unconventional monetary policy; currency wars that have been launched have also been lost. UMP is also associated with a comparable drop in imports and exchange rates, suggesting that countries engage in UMP when they are experiencing adverse macroeconomic shocks concurrent with those that eviscerate international trade.

Suggested Citation

Rose, Andrew Kenan and Rose, Andrew Kenan, Currency Wars? Unconventional Monetary Policy Does Not Stimulate Exports (July 2018). NBER Working Paper No. w24817, Available at SSRN: https://ssrn.com/abstract=3214363

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