Exchange Rate Volatility and International Trade Flows in sub-Saharan Africa: Empirical Evidence

In this article, the authors examine the relationship between the volatility in exchange rates and the volume of international trade in sub-Saharan African countries. Using the gravity equation and annual data for the period 1998–2007, they find a statistically significant and negative correlation between the volatility in exchange rates and the volume of trade. The estimated elasticities show that the responsiveness of the flow of international trade to changes in exchange rate volatility is very small. This suggests that eliminating the volatility in the exchange rates will result in only small increments in the volume of trade. Accordingly, pursuing a policy of exchange rate stability would not be sufficient to significantly increase the volume of bilateral trade in the sub-Saharan African region.     

Exchange rates and the volume of trade—The case for fixed exchange rates

Exchange rate volatility and long-term distortions of exchange rate levels have given rise to concern among participants in international trade. Do exchange rate fluctuations have an adverse impact on the volume of trade? What measures could be taken to achieve greater exchange rate stability?     

The short run efficacy of monetary policy under floating exchange rates reconsidered

This paper disputes the argument that the short-run effectiveness of monetary policy in stabilizing domestic output under floating rates is necessarily reduced if elasticities of demand for imports and exports with respect to the current exchange rate are low and capital flows depend on the exchange rate. It is shown that the relative efficacy of monetary changes is determined by the interest rate elasticity of international interest payments and receipts and the effect of exchange rate variations on the demand for money in addition to the exchange rate elasticities of trade and capital flows.     

A new assessment of floating exchange rates

The switch to floating exchange rates during the 1970s has given economists the first comprehensive opportunity to assess the arguments for and against floating. Much new work has been done on various aspects of floating exchange rate behaviour. This article attempts a limited survey of the evidence concerning two important issues—whether floating exchange rates are inherently unstable and whether they harm international trade.     

Reforming the GATT: The use of trade measures for balance-of-payments purposes

The GATT rules which govern international trade are to be reformed during the current Multilateral Trade Negotiations. It is widely agreed that among the rules most in need of change are those relating to the use of trade policy measures, such as import quotas and surchages, for balance-of-payments purposes. This article reviews the role of such measures under international monetary regimes based on both fixed and flexible exchange rates, and concludes that they should no longer be authorized by the GATT. If they do remain part of the system, a number of major changes are needed in both the substantive and procedural rules which govern their use.     

中国汇率、利率、物价等相关关系研究

在经济运行过程中汇率、利率和物价三者关系紧密、相互影响,对经济的运行具有重大的意义。汇率的低估会引发物价上升,而实际汇率又由物价所决定。利率的变化对即期和远期的汇率也会产生重大的影响。我国的通货膨胀不仅应当通过抬高利率来抑制,更重要的应该通过对人民币正确估值,合理变动人民币汇率来解决。     

Effects of the flexible exchange rate system on developing countries

The Bretton Woods system of fixed exchange rates was abandoned by the industrialised countries in March 1973. They switched to a system of flexible exchange rates. Representatives of the developing countries were particularly critical of the industrialised countries’ exchange rate flexibility. They saw themselves not only bearing the brunt of the costs associated with balance of payments readjustments but also faced with greater fluctuations both in prices and terms of trade and with other negative effects due to the general increase in uncertainty regarding exchange rates. Are such fears justified?     

Real Exchange Rates and ASEAN Trade

This paper systematically analyses the longer-term effects on the Association of South-East Asian Nations (ASEAN) trade of changes in competitiveness brought about by changing real exchange rates. We introduce a model to explain exports from four ASEAN countries which highlights the role of real exchange rates. Specifically, we provide evidence on the price responsiveness of export demand. The results indicate that (i) there have been large changes in real exchange rates; and (ii) the pattern of ASEAN trade responds to relative prices (real exchange rates). Suprisingly, however, the impact of observed changes in real exchange rates on ASEAN trade is only relatively minor.     

Flexible exchange rates and international trade: An empirical investigation of bilateral flows

This paper investigates the alleged adverse effect of floating exchange rates on international trade. A simple model is constructed to test the relationship between exchange rate variability and bilateral trade flows between the United States and three of its major trading partners: Canada, Japan and Germany. Using data from 1960 to 1983 to encompass both “stable” and floating rate regimes, it is shown that while exchange rate variability is considerably higher in the floating period, there is no evidence that this greater variability has had a negative impact on trade flows.     

Unstable exchange rates and trade policy

Floating exchange rates affect two basic principles of GATT, namely: stability of trade policy conditions and reciprocity of trade concessions. What is the relevance of the changes to foreign trade? What possibilities for surmounting the new problems exist in the realm of external economic relations?     

A new world order: explaining the international diffusion of the gold standard, 1870-1913

The gold standard gradually became an international monetary regime after 1870. Similarly, some nations in the European Union are waiting to adopt the euro while others have joined immediately. What explains the timing of exchange rate regime adoption? To find out, the international diffusion of the gold standard is analyzed. Duration analysis shows that network externalities operating through trade channels, the desire to decrease borrowing costs on international capital markets, and the level of development matter. Some evidence shows that the level of exchange rate volatility or inflationist agricultural interests did not matter for the timing of adoption.     

试论技术壁垒对国际贸易的影响及对策

中国加入世界贸易组织后,可以在WTO框架内参与国际分工,充分利用中国的比较优势参与国际竞争,利用WTO规则,开展国际贸易,这将极大促进中国对外贸易的发展。 但随着经济全球化和贸易自由化的发展,各国限制贸易的手段也发生了极大的变化,从以关税壁垒为主要手段发展为以非关税壁垒为主要手段,在非关税壁垒中,进口配额、 “自动”出口配额、进口许可证、外汇管制等传统手段已被以技术法规、技术标准、合格评定程序为主要内容的技术壁垒逐渐取代,技术壁垒正成为国际贸易壁垒的主体。     

Teaching the Linkages Between the International Credit and Foreign Exchange Markets

ABSTRACT

This paper presents a teaching model which provides an analytical framework that encourages students to think about economic events in a global context. It ties the international credit and foreign exchange markets together and shows how international capital flows represent the crucial linkage between them. This model is primarily a teaching tool which illustrates how changes in monetary and fiscal policies in one country, say Japan, impact world interest rates, exchange rates, and trade and capital imbalances for other countries. This approach can also be used to illustrate the impacts of changes in savings and investment behavior by businesses and households, as well as central bank interventions.     

Trade liberalization and adjustment in Argentina

This paper looks at trade liberalization attempts in Argentina since 1970, with particular attention to the 1991?–?98 period, estimates the size of the adjustments required by the changes in the trade regimes, and looks at the degree of adjustment attained as manifested by the real effective exchange rate.     

Is China's Exchange Rate Policy a Form of Trade Protection?

This paper examines how China's heavily managed exchange rate contributes to its huge trade surplus with its major trading partners, most notably the United States. Based on the distinction between economies’ aggregate output and expenditure and on the premise that exchange rates are shared variables, it develops a straightforward framework that shows how exchange rate management by China's central bank affects China's fast growing output, expenditure, employment, and trade balance, while simultaneously influencing these aggregates in its slower growing industrialized trading partners. This framework reveals that under conditions of limited private capital mobility an inflexible yuan yields higher short-run output gains for China at trading partners’ expense through a form of “exchange rate protection.” At the same time exchange rate misalignment limits China's consumption and hence living standards. A misaligned currency is also shown to bias international saving and investment flows and is central to any explanation of global imbalances.     

An empirical inquiry into the nature of the forward exchange rate bias

This paper tests whether anticipated real exchange rate movements fully account for the systematic, time-varying discrepancies between forward and future spot exchange rates. The data do not reject this hypothesis. The results demonstrate that (1) real exchange rate changes are predictable; (2) anticipated real exchange rate changes are reflected in the forward bias; and (3) information available at the signing of the forward contract is useless in forecasting differences between forward and future spot prices beyond the information's ability to predict real exchange rate changes. The results emphasize the importance of real exchange rates in international asset pricing.     

Trade and Exchange Rate Policies in Formerly Centrally Planned Economies

This paper examines the international economic policies of the eastern European and Soviet Successes States in the early 1990s which provide one of those wide‐open windows of opportunity when powerful vested interests are not lobbying for retention of an existing tariff structure. Moreover, the simultaneous abandonment of central planning by over two dozen countries provided a natural experiment in which a range of differing policies might have been pursued. Policymakers in transition economies have generally ended up pursuing liberal non‐discriminatory trade and foreign exchange policies. There are exceptions and the majority may be wrong, but the presumption is that, perhaps after a learning or trial‐and‐error process, decision makers have found the rules of thumb suggested by economists to be their best guide to international economic policy. This paper notes that integration of transition economies into the global trading system has been surprisingly successful. Almost all the countries in transition from central planning have accepted the WTO rule‐based system in principle, even if there are variations in trade policies and performance, and have generally pursued multilateral non‐discriminatory trade policies. In particular, the potential danger of regionalism proving more attractive than multilateralism has not eventuated. The revealed behaviour of policymakers suggests that trade liberalisation is a good rule of thumb and regional groupings among transition economies have been insignificant. Despite a proliferation of new currencies, varying exchange rate regimes, and differing degrees of currency convertibility, the general pattern has been to accept convertibility for current account transdactions, and in many cases to extend this to a de jure commitment and to allow substantial capital account convertibility. A general policy conclusion in favour of more open and non‐discriminatory trade and exchange policies have passed the test of acceptability by policymakers in over two‐dozen countries in this category.     

AMU Deviation Indicators for Coordinated Exchange Rate Policies in East Asia and their Relationships with Effective Exchange Rates

After the Asian currency crisis in 1997, the monetary authorities of East Asian countries have been strengthening their regional monetary cooperation. In this paper, we propose a deviation measurement for coordinated exchange rate policies in East Asia to enhance the monetary authorities’ surveillance process for their regional monetary cooperation. We calculate an Asian Monetary Unit (AMU) as a weighted average of East Asian currencies following the method used to calculate the European Currency Unit (ECU). Also, we calculate AMU Deviation Indicators which show how much each of the East Asian currencies deviates from a hypothetical benchmark rate in terms of the AMU. Furthermore, we investigate relationships between the AMU Deviation Indicators and the effective exchange rates, which mean international price competitiveness in terms of international trade. We found strong relationships between the AMU Deviation Indicators and the effective exchange rates except for some currencies. The results suggest that monitoring the AMU Deviation Indicator will be useful for the monetary authorities’ surveillance in East Asia in order to stabilise their effective exchange rate or price competitiveness among the East Asian countries.     

Floats,glides and indicators : A comparison of methods for changing exchange rates

A model of the spot market for foreign exchange is used to study the behavior of exchange rates, official reserves, and speculators' profits when exchange rates are flexible, pegged, and regulated by gliding-parity rules based on averages of spot rates, levels and changes in reserves, and the basic balance. The behavior of the spot rate and efficacy of various gliding-parity rules is shown to depend on the way that speculators form expectations. Some rules, however, are more efficient in minimizing fluctuations of exchange rates and trade volume, especially rules based on changes in reserves and averages of past market rates. Rules based on levels of reserves prove to be least efficient.     

The exchange rate and the price level

The US-Dollar has inflated the world. Its vehicle is the present international monetary system of pegged exchange rates. This system which was introduced to stimulate International trade and division of labour between the different countries became an important promoter of world wide inflation.