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Exchange Rate Regimes in the Modern Era$
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Michael W. Klein and Jay C. Shambaugh

Print publication date: 2009

Print ISBN-13: 9780262013659

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262013659.001.0001

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Exchange Rate Regimes and International Trade

Exchange Rate Regimes and International Trade

(p.147) 9 Exchange Rate Regimes and International Trade
Exchange Rate Regimes in the Modern Era

Michael W. Klein

Jay C. Shambaugh

The MIT Press

This chapter examines the effect of exchange rate regimes on international trade through an overview of the research conducted on the effects of exchange rate volatility on trade. Research done by Rose as well as Klein and Shambaugh are taken into account as well to present evidence of the economically meaningful influence of fixed exchange rates and exchange rate regimes on trade. Further literature is discussed and investigated to give a broader scope of the subject. The chapter also demonstrates the value of gravity models as a successful empirical framework in international economics. In conclusion, the chapter tries to show the demerits of pegging and how it promotes an expansion of bilateral trade with the base country.

Keywords:   international trade, exchange rate volatility, fixed exchange rates, exchange rate regimes, gravity models, international economics, pegging, bilateral trade

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