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Exchange Rate Regimes and the Extensive Margin of Trade

  • Economics


5Exchange Rate Regimes and the Extensive Margin of Trade This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: NBER International Seminar on Macroeconomics 2008 Volume Author/Editor: Jeffrey Frankel and Christopher Pissarides, organizers Volume Publisher: University of Chicago Press Volume ISBN: 978-0-226-10732-5 ISSN: 1932-8796 Volume URL: Conference Date: June 20-21, 2008 Publication Date: April 2009 Chapter Title: Exchange Rate Regimes and the Extensive Margin of Trade Chapter Author: Paul R. Bergin, Ching-Yi Lin Chapter URL: Chapter pages in book: (p. 201 - 227) firms or products. Recent research in trade theory has emphasized this distinction, as it has implications for the welfare gains of trade and re- source allocation. The empirical section of this paper conducts panel gravity regressions, analogous to those of Rose (2000) and Klein and theNBER/UNdata base prepared byRobert Feenstra andRobert Lipsey, which records bilateral trade flows at a four‐digit disaggregated goods level. This data set covers the years 1962–2000, so it does not include the recent experience of the EuropeanMonetary Union (Feenstra et al. 2005). Consequently, the results for currency unions, like those in Rose (2000), Shambaugh (2006), but it considers three distinct independent variables: bilateral trade flows, the extensive margin of bilateral trade, and the in- tensive margin. The extensive and intensive margins aremeasured using 5 Exchange Rate Regimes and the Extensive Margin of Trade Paul R. Bergin, University of California, Davis, and NBER Ching‐Yi Lin, National Tsing Hua University I. Introduction A primary rationale given by many countries adopting regimes of ex- change rate stabilization, be it a peg or a full currency union, is the goal of promoting more international trade. Despite a long literature failing to show a robust linkage betwe

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