On Crises, International Trade and Exchange Rate Regimes
16 Pages Posted: 22 Jul 2015
Date Written: January 15, 2014
Abstract
The main objective of this paper is to study the performance of exchange rate regimes on international trade during crisis episodes. To that end, a gravity equation is estimated for a sample of 194 countries over the period 1970-2011, by adding a set of regressors built from a de facto classification of exchange rate arrangements and the dates of recognized financial crises. This paper studies the behaviour of the different exchange rate regimes in the context of both global and domestic economic crises. The results indicate that sharing a common currency seems to be the best exchange rate arrangements in terms of its effect on trade during crisis episodes. The results also suggest that the fixer the regime is, the more intense is its promoting impact on trade during crises.
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