{
  "title": "Limiting Currency Volatility to Stimulate Goods Market Integration: A Price-Based Approach",
  "publication": "IMF Working Papers, December 1, 2001",
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  "summary": "This paper studies the effect of instrumental and institutional stabilization of exchange rate volatility on the integration of goods markets. Rather than using data on volume of trade, this paper employs a 3-dimensional panel of prices of 95 very disaggregated goods (e.g.",
  "sections": [
    {
      "heading": "Research question and data",
      "content": "- Studies the effect of instrumental and institutional stabilization of exchange rate volatility on the integration of goods markets.\n- Uses a 3-dimensional panel of prices of 95 very disaggregated goods (e.g., light bulbs) in 83 cities around the world during 1990-2000.\n- Focuses on price data rather than volume of trade."
    },
    {
      "heading": "Key findings",
      "content": "- Institutional stabilization (currency board or dollarization) promotes market integration far beyond an instrumental stabilization.\n- Long-term currency unions are more effective at promoting market integration than more recent currency boards.\n- Even the most effective arrangements examined have room to improve relative to a U.S. benchmark."
    },
    {
      "heading": "Concepts and measures emphasized",
      "content": "- Exchange rate volatility and exchange rate variability.\n- Goods market integration measured via price comparison, price difference, percentage price deviation, and price dispersion across cities for 95 disaggregated goods.\n- Distinctions among common currency, currency union, conventional peg, currency boards, hard pegs, and dollarization."
    },
    {
      "heading": "Implications for policy",
      "content": "- Institutional arrangements that reduce exchange rate volatility (e.g., long-term currency unions) can strengthen goods market integration more than purely instrumental interventions.\n- Currency boards and dollarization can promote integration, but effectiveness varies by type and longevity of the institutional arrangement.\n- Policymakers seeking stronger goods market integration should consider the durability and institutional depth of exchange rate arrangements."
    },
    {
      "heading": "Scope and limitations noted",
      "content": "- Analysis is based on price data across cities and goods for 1990-2000; results pertain to price-based measures of integration rather than trade volumes.\n- Comparison benchmark is the U.S.; improvements are possible relative to that benchmark.\n\nSource: Limiting Currency Volatility to Stimulate Goods Market Integration: A Price-Based Approach (David C. Parsley, Shang-Jin Wei, December 1, 2001).\n\n---\n\n Content in this bundle\n\n- wp01197\n  - wp01197 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp01197 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/limiting-currency-volatility-to-stimulate-goods-market-integration-a-price-based-approach-15473"
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    "Authors: David C. Parsley, Shang-Jin Wei",
    "Published: December 1, 2001",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451860016.001",
    "Studies the effect of instrumental and institutional stabilization of exchange rate volatility on the integration of goods markets.",
    "Uses a 3-dimensional panel of prices of 95 very disaggregated goods (e.g., light bulbs) in 83 cities around the world during 1990-2000.",
    "Focuses on price data rather than volume of trade.",
    "Institutional stabilization (currency board or dollarization) promotes market integration far beyond an instrumental stabilization.",
    "Long-term currency unions are more effective at promoting market integration than more recent currency boards.",
    "Even the most effective arrangements examined have room to improve relative to a U.S. benchmark.",
    "Exchange rate volatility and exchange rate variability.",
    "Goods market integration measured via price comparison, price difference, percentage price deviation, and price dispersion across cities for 95 disaggregated goods.",
    "Distinctions among common currency, currency union, conventional peg, currency boards, hard pegs, and dollarization.",
    "Institutional arrangements that reduce exchange rate volatility (e.g., long-term currency unions) can strengthen goods market integration more than purely instrumental interventions.",
    "Currency boards and dollarization can promote integration, but effectiveness varies by type and longevity of the institutional arrangement.",
    "Policymakers seeking stronger goods market integration should consider the durability and institutional depth of exchange rate arrangements.",
    "Analysis is based on price data across cities and goods for 1990-2000; results pertain to price-based measures of integration rather than trade volumes.",
    "Comparison benchmark is the U.S.; improvements are possible relative to that benchmark.",
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