Exchange Rate Regimes and International Trade

Gothenburg University WP 1996:2

Posted: 3 Apr 1997

See all articles by Clas Wihlborg

Clas Wihlborg

Chapman University; University West

Reuven Glick

Federal Reserve Bank of San Francisco - Center for Pacific Basin Monetary & Economic Studies

Date Written: May 1996

Abstract

The existing evidence on the volume effects of exchange rate risk and exchange rate regime choice is examined. The analysis involves estimating the effects of cross-country differences in exchange rate regime on export and import elasticities using a continuous measure of the degree of exchange rate flexibility. It is argued that risk for firms involved in international trade tends to decrease with greater exchange rate flexibility. In formulating our hypotheses we argued that the cross-country variation in U.S. export elasticities with respect to the real exchange rate and foreign GDPs is primarily attributable to the cross- country variation in bilateral exchange rate regime-related risk. The empirical results showed that U.S. export elasticities increase with the degree of bilateral exchange rate flexibility of the importing country. We interpreted this result as an indication that the total macroeconomic risk exporters face decreases as the degree of exchange rate flexibility increases.

JEL Classification: F11, F31, F32

Suggested Citation

Wihlborg, Clas and Glick, Reuven, Exchange Rate Regimes and International Trade (May 1996). Gothenburg University WP 1996:2. Available at SSRN: https://ssrn.com/abstract=4793

Clas Wihlborg (Contact Author)

Chapman University ( email )

333 N. Glassell
Orange, CA 92866
United States
+17147447630 (Phone)

University West ( email )

Trollhättan, 46186
Sweden

Reuven Glick

Federal Reserve Bank of San Francisco - Center for Pacific Basin Monetary & Economic Studies ( email )

101 Market Street
San Francisco, CA 94105
United States
415-974-3184 (Phone)
415-974-2168 (Fax)

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