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Exchange Rate Regimes, Specialization and Trade Volume

HKIMR Working Paper No. 22/2006

27 Pages Posted: 23 Aug 2007  

Michael B. Devereux

University of British Columbia (UBC) - Department of Economics; Centre for Economic Policy Research (CEPR)

Graham M. Voss

University of Victoria - Department of Economics

Date Written: November 2004

Abstract

We develop a general equilibrium monetary model of endogenous specialization and international trade to examine the degree of specialization and trade volume under alternative exchange rate regimes. Where demand shocks are important, we demonstrate an increase in specialization, trade and welfare under coordinated fixed exchange rates, equivalent to a common currency, relative to flexible exchange rates. Where supply shocks are important, the effects on specialization and trade are smaller and ambiguous in direction, though the welfare effects are comparable to those for demand shocks.

Keywords: Exchange Rates, Common Currency, International Trade

JEL Classification: E42, F33, F42

Suggested Citation

Devereux, Michael B. and Voss, Graham M., Exchange Rate Regimes, Specialization and Trade Volume (November 2004). HKIMR Working Paper No. 22/2006. Available at SSRN: https://ssrn.com/abstract=1009050 or http://dx.doi.org/10.2139/ssrn.1009050

Michael B. Devereux (Contact Author)

University of British Columbia (UBC) - Department of Economics ( email )

997-1873 East Mall
Vancouver, BC V6T 1Z1
Canada
604-822-2542 (Phone)
604-946-6271 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Graham M. Voss

University of Victoria - Department of Economics ( email )

Victoria V8W Y2Y, BC
Canada

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