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dc.contributor.authorDong, Weien_US
dc.date.accessioned2011-12-15T12:58:45Z-
dc.date.available2011-12-15T12:58:45Z-
dc.date.issued2007en_US
dc.identifier.urihttp://hdl.handle.net/10419/53958-
dc.description.abstractThe author investigates the quantitative importance of the expenditure-switching effect by developing and estimating a structural sticky-price model nesting both producer currency pricing (PCP) and local currency pricing (LCP) settings. The author aims to provide empirical evidence of the magnitude of the benefits to be gained from exchange rate flexibility in terms of expenditure switching, and to contribute to the ongoing debate regarding the optimal exchange rate regime. In the author's model, the size of the expenditure-switching effect is determined by the degree of price stickiness, the fraction of firms employing PCP versus LCP, the distribution margin, and the elasticity of substitution between domestic and foreign tradable goods. The model is estimated for three small open economies: Australia, Canada, and the United Kingdom. The empirical results suggest that, among the three countries, the magnitude of the expenditure switching by domestic agents is relatively small for the United Kingdom, and comparatively large for Canada; the distribution margin in the United Kingdom is exceptionally high, which limits the degree of domestic expenditure switching initiated by nominal exchange rate movements. Moreover, expenditure switching by foreign distributors is comparatively small for Australia and Canada, since a larger fraction of Australian and Canadian firms adopt LCP for their export pricesetting.en_US
dc.language.isoengen_US
dc.publisherBank of Canada Ottawaen_US
dc.relation.ispartofseriesBank of Canada Working Paper 2007,54en_US
dc.subject.jelF3en_US
dc.subject.jelF4en_US
dc.subject.ddc330en_US
dc.subject.keywordExchange rate regimesen_US
dc.subject.keywordInternational topicsen_US
dc.subject.stwWechselkurssystemen_US
dc.subject.stwFlexibler Wechselkursen_US
dc.subject.stwPreisrigiditäten_US
dc.subject.stwSubstitutionselastizitäten_US
dc.subject.stwHandelbares Guten_US
dc.subject.stwAustralienen_US
dc.subject.stwKanadaen_US
dc.subject.stwGroßbritannienen_US
dc.subject.stwTheorieen_US
dc.titleExpenditure-switching effect and the choice of exchange rate regimeen_US
dc.typeWorking Paperen_US
dc.identifier.ppn551413484en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Bank of Canada Working Papers

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