The role of expenditure switching in the global imbalance adjustment

Arbeitspapier

In theory, nominal exchange rate movements can lead to 'expenditure switching' when they generate changes in the relative prices of goods across countries. This paper explores whether the expenditure-switching role of exchange rates has changed in the current episode of significant global imbalances. We develop a multi-sector two-country model for the United States and the G6 countries, with the rest of the world captured by exogenous price and demand shocks, and estimate the model over two sub-samples, which cover the periods before and after the early 1990s. Our results indicate that both U.S. imports and exports have become much less responsive to exchange rate movements in recent years, mainly due to changes in firms' pricing behavior and the increased size of distribution margins. These findings suggest that the exchange rate would have to move by a much larger amount now than in the 1970s and 1980s to reduce the U.S. trade deficit by a given amount.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Bank of Canada Working Paper ; No. 2010-16

Klassifikation und Themen

• Klassifikation: Wirtschaft
• Thema: Exchange rates ; international topics ; Wechselkurspolitik ; Außenhandelspreis ; Preiswettbewerb ; Konsumentenverhalten ; Zahlungsbilanzungleichgewicht ; Welt

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Dong, Wei
• Ereignis: Veröffentlichung
• (wer): Bank of Canada
• (wo): Ottawa
• (wann): 2010

Weitere Informationen

• DOI: doi:10.34989/swp-2010-16
• Handle: http://hdl.handle.net/10419/53952
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ