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Exchange Rates as Trade Frictions: Estimates and Implications for Policy

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Listed:
  • James E. Anderson
  • Praveen Saini

Abstract

This paper improves on current treatment of exchange rate variation in quantitative trade models. Exchange rate changes with heterogeneous passthrough to buyers are embedded in the structural gravity model. Quantification on two digit annual bilateral trade data reveals real effects of exchange rate changes on producers that are substantial for some country-sector-time period observations. Real national income effects are small but not always negligible. Effective exchange Rates with Gravitas (ERGs) are introduced as theory-consistent indexes to guide potential policy remedies.

Suggested Citation

  • James E. Anderson & Praveen Saini, 2021. "Exchange Rates as Trade Frictions: Estimates and Implications for Policy," NBER Working Papers 29428, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29428
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    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F3 - International Economics - - International Finance

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