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On the distributional effects of exchange rate fluctuations

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  • Cédric Tille

Abstract

The paper studies the differential impact of exchange rate fluctuations on households in a country. I extend earlier research by relaxing the assumption of complete international sectoral specialization. My setup allows for the presence of several different sectors in a given country, each producing a different type of good. Combined with incomplete asset markets, the sectoral dimension leads to a heterogeneous impact of exchange rate fluctuation within each country. In particular, although a depreciation of a country's currency has an adverse 'beggar-thyself' effect for the country as a whole, a minority of households benefit.

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  • Cédric Tille, 2002. "On the distributional effects of exchange rate fluctuations," Staff Reports 146, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:146
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    References listed on IDEAS

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    1. Michael B. Devereux & Charles Engel & CÈdric Tille, 2003. "Exchange Rate Pass-Through and the Welfare Effects of the Euro," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(1), pages 223-242, February.
    2. Corsetti, Giancarlo & Pesenti, Paolo, 2005. "International dimensions of optimal monetary policy," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 281-305, March.
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    10. Tille, Cedric, 2001. "The role of consumption substitutability in the international transmission of monetary shocks," Journal of International Economics, Elsevier, vol. 53(2), pages 421-444, April.
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    19. V. V Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2002. "Can Sticky Price Models Generate Volatile and Persistent Real Exchange Rates?," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 533-563.
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    21. Luca Ricci, 2006. "Uncertainty, Flexible Exchange Rates, and Agglomeration," Open Economies Review, Springer, vol. 17(2), pages 197-219, April.
    22. Cédric Tille, 1999. "The role of consumption substitutability in the international transmission of shocks," Staff Reports 67, Federal Reserve Bank of New York.
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    Cited by:

    1. Weber, Sebastian & Wyplosz, Charles, 2009. "Exchange rates during the crisis," Policy Research Working Paper Series 5059, The World Bank.
    2. Bacchetta, Philippe & van Wincoop, Eric, 2005. "A theory of the currency denomination of international trade," Journal of International Economics, Elsevier, vol. 67(2), pages 295-319, December.
    3. José María Serena & Ricardo Sousa, 2017. "Does exchange rate depreciation have contractionary effects on firm-level investment?," BIS Working Papers 624, Bank for International Settlements.
    4. Suah, Jing Lian, 2020. "Veiled Expectations: The Heterogeneous Impact of Exchange Rate Shocks at the Sectoral-Level," MPRA Paper 109086, University Library of Munich, Germany.
    5. Goodness C. Aye & Laurence Harris, 2019. "The effect of real exchange rate volatility on income distribution in South Africa," WIDER Working Paper Series wp-2019-29, World Institute for Development Economic Research (UNU-WIDER).
    6. Cédric Tille, 2002. "How valuable is exchange rate flexibility? Optimal monetary policy under sectoral shocks," Staff Reports 147, Federal Reserve Bank of New York.
    7. Philip R Lane & Livio Stracca, 2018. "Can appreciation be expansionary? Evidence from the euro area," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 33(94), pages 225-264.
    8. William Craighead, 2012. "Specific Factors and International Monetary Policy Coordination," Open Economies Review, Springer, vol. 23(2), pages 319-336, April.

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    Keywords

    Production (Economic theory); Foreign exchange rates;

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