Narrow Results

This paper estimates the trade costs from international relative prices, and studies the economic determinants of implied trade costs. We find that the magnitude of trade costs depends on the characteristics of both the type of good and set of locations under examination. In particular, it is found that higher non-traded input share and trade barriers, and lower tradability of goods lead to a larger trade cost, as does a lower proximity of geographic distance between locations.

Price differentials, among other factors, persuade many residents of Northern Mexico to shop in the Southwestern United States border region. Employment patterns in the latter region are studied using a set of control variables and two indicators that are likely to influence cross-border shopping patterns. The first is a real exchange rate index, which captures changes in relative prices in the United States and Mexico. The second is real per capita gross state product in Mexican states adjacent to the international boundary. Both of these variables are found to impact retail and restaurant employment in the United States border zone, confirming that cross-border shopping influences labor market conditions in that region. Furthermore, the estimated elasticities vary across retail sub-sectors in ways that are generally consistent with prior research. Overall, the results suggest that economic setbacks in Northern Mexico and real peso depreciations are likely to have adverse consequences for important sectors of border economies in the United States.

This study investigates the impacts of workers’ remittances on real exchange rates and net export by using data for 101 developing countries from 1990 to 2015. One challenge in addressing the impacts of remittances on real exchange rates is the endogeneity of remittances. To address the endogeneity of remittances, we estimate bilateral remittances and use them to create weighted indicators of remittance-sending countries. These weighted indicators are used as instruments for remittance inflow to remittance-receiving countries. Results obtained in this study indicate that remittances lead to real exchange rates appreciation and net export reduction in remittance-receiving countries.

This study explores the long- and short-run movement between oil prices and the real exchange rates of two large oil-exporting countries – Canada and Norway. Cointegration and serial correlation common features tests are jointly used to identify the long-term common trend and short-term common cycles. Our test results find that oil prices and the real exchange rates of the Canadian Dollar and the Norwegian Krone have two shared trends and one shared cycle. The trend–cycle decomposition shows a great deal of positive comovement among the trend and cyclical components. The two currencies show economic dynamics very similar to crude oil prices. They do not exhibit any qualitative differences in the trajectory of the trend and cycles when controlling for different crude oil prices. Our results indicate that oil price fluctuations play significant role in explaining the exchange rate movements of oil-exporting countries.

This study attempts to examine the effects of real bilateral exchange rates on Malaysia's bilateral trade balances with its three major trading partners: the USA, Japan, and Singapore. The results suggest that the bilateral trade balance, real exchange rate, domestic and foreign incomes are cointegrated. In the long-run, Malaysia's bilateral trade balances are found to be responsive to the changes of bilateral exchange rate in the cases of the USA and Singapore but irresponsive for Japan. There is a clear evidence of the J-curve effect only in the case of Malaysia's trade balance with the United States. The results also indicate that devaluation tends to be recessionary. The findings suggest that Malaysia could use undervalued exchange rate strategy to improve its trade balances with the United States and Singapore but not Japan.