:::
Trans. Planning Journal
| Title | To Understand the Effects of Transportation Costs under Different Exchange Rate Regimes |
|---|---|
| Author | Chung-Fu Lai |
| Summary | In this paper, we follow the New Open Economy Macroeconomics to investigate how transportation costs affect the consumption volatility, expected level of consumption, and the welfare performance under alternative exchange-rate regimes for a country facing foreign monetary shocks. According to the theoretical derivation and numerical simulation, we find that the parameters of transportation costs, pricing to market, the degree of home bias and capital mobility are the key factors that affect the effect of a foreign monetary disturbance on domestic consumption and welfare level. From the aspect of the role of transportation costs, the results show that the consumption volatility under floating exchange rate with producer-currency pricing (PCP model for short) and with foreign currency standard (FCS model for short) will be probability greater than that in fixed exchange rate regime (FER model for short) by the higher cost of transport. And, we can also find that an increase in transportation costs will lead to a decrease of expected consumption under PCP, FCS and FER models. Finally, the welfare level will decrease under alterative exchange rate regime with the higher transportation costs. |
| Vol. | 45 |
| No. | 1 |
| Page | 23 |
| Year | 2016 |
| Month | 3 |
Count Views:490