{
  "title": "The Empirics of Exchange Rate Regimes and Trade: Words vs. Deeds",
  "publication": "IMF Working Papers, February 1, 2010",
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  "summary": "This paper examines the impact of exchange rate regimes on bilateral trade while differentiating the effects of \"words\" and \"deeds\".",
  "sections": [
    {
      "heading": "Summary and core findings",
      "content": "- Study objective: examines the impact of exchange rate regimes on bilateral trade while differentiating the effects of \"words\" (de jure policy announcements) and \"deeds\" (de facto actions).\n- Main finding: fixed exchange rate regimes increase trade.\n- Words versus deeds: there is no systematic difference in the effects of policy announcements versus actions to maintain exchange rate stability.\n- Alignment effect: the trade-generating effect of more stable exchange rate regimes is more pronounced when words and actions are aligned, both in the short and long-run.\n- Role of credibility: policy credibility plays an important role in determining the effects of de jure and de facto exchange rate arrangements; deviations between the two could be costly."
    },
    {
      "heading": "Additional empirical results",
      "content": "- Hard pegs versus conventional pegs: evidence that the impact of hard pegs such as currency unions is broadly similar to that of conventional pegs.\n- Time evolution: the currency union and direct peg effects evolve over time.\n- Heterogeneity: the effects of more stable regimes are heterogeneous across country groups."
    },
    {
      "heading": "Policy implications",
      "content": "- Ensure alignment between announced exchange rate policy (words) and actual policy implementation (deeds) to maximize trade benefits.\n- Recognize the importance of government/monetary authority credibility in obtaining trade gains from stable exchange rate arrangements.\n- Consider that currency unions and direct pegs produce trade effects comparable to conventional pegs, but these effects may change over time and differ across country groups.\n\n---\n\n Content in this bundle\n\n- wp1048\n  - wp1048 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - wp1048 (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/the-empirics-of-exchange-rate-regimes-and-trade-words-vs-23613"
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    "[Markdown version](/en/publications/wp/issues/2016/12/31/the-empirics-of-exchange-rate-regimes-and-trade-words-vs-23613/index.md)",
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    "Authors: Mahvash S Qureshi, Charalambos G Tsangarides",
    "Published: February 1, 2010",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451963199.001",
    "Study objective: examines the impact of exchange rate regimes on bilateral trade while differentiating the effects of \"words\" (de jure policy announcements) and \"deeds\" (de facto actions).",
    "Main finding: fixed exchange rate regimes increase trade.",
    "Words versus deeds: there is no systematic difference in the effects of policy announcements versus actions to maintain exchange rate stability.",
    "Alignment effect: the trade-generating effect of more stable exchange rate regimes is more pronounced when words and actions are aligned, both in the short and long-run.",
    "Role of credibility: policy credibility plays an important role in determining the effects of de jure and de facto exchange rate arrangements; deviations between the two could be costly.",
    "Hard pegs versus conventional pegs: evidence that the impact of hard pegs such as currency unions is broadly similar to that of conventional pegs.",
    "Time evolution: the currency union and direct peg effects evolve over time.",
    "Heterogeneity: the effects of more stable regimes are heterogeneous across country groups.",
    "Ensure alignment between announced exchange rate policy (words) and actual policy implementation (deeds) to maximize trade benefits.",
    "Recognize the importance of government/monetary authority credibility in obtaining trade gains from stable exchange rate arrangements.",
    "Consider that currency unions and direct pegs produce trade effects comparable to conventional pegs, but these effects may change over time and differ across country groups.",
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