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Currency PoliticsThe Political Economy of Exchange Rate Policy$
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Jeffry A. Frieden

Print publication date: 2016

Print ISBN-13: 9780691173849

Published to Princeton Scholarship Online: January 2018

DOI: 10.23943/princeton/9780691173849.001.0001

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PRINTED FROM PRINCETON SCHOLARSHIP ONLINE (www.princeton.universitypressscholarship.com). (c) Copyright Princeton University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in PRSO for personal use.date: 16 September 2021

Conclusions

Conclusions

Chapter:
(p.264) Conclusions
Source:
Currency Politics
Author(s):

Jeffry A. Frieden

Publisher:
Princeton University Press
DOI:10.23943/princeton/9780691173849.003.0008

This chapter summarizes key findings. This book makes a simple theoretical argument about the distributional implications of exchange rate policy. It suggests that economic actors with important cross-border interests, exposed to currency volatility, will tend to prefer more stable and predictable exchange rates. It also claims that tradables producers will, all else being equal, tend to prefer a depreciated real exchange rate. These concerns will be tempered by the extent of exchange rate pass-through—that is, the degree to which currency movements affect domestic prices. The analysis in this book shows that countries whose economic agents are more involved in cross-border trade are more likely to fix their exchange rates in order to reduce currency volatility. Countries with large groups susceptible to import or export competition—import-competing manufacturers and export farmers—are more likely to choose flexible exchange rates that allow currency depreciations. Governments facing an election encourage or allow currency appreciation that increases the purchasing power of consumers.

Keywords:   exchange rate policy, currency policy, exchange rates, cross-border trade

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