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Currency Wars? Unconventional Monetary Policy Does Not Stimulate Exports
Author(s) -
ROSE ANDREW K.
Publication year - 2021
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12815
Subject(s) - economics , endogeneity , international economics , currency , monetary economics , monetary policy , boom , instrumental variable , exchange rate , environmental engineering , econometrics , engineering
I investigate whether countries that use unconventional monetary policy (UMP) experience export booms. I use a popular gravity model of trade which requires neither the exogeneity of UMP, nor instrumental variables for UMP. In practice, countries that engage in UMP experience a drop in exports vis‐à‐vis countries that are not engaged in such policies, holding other things constant. Quantitative easing is associated with exports that are about 10% lower to countries not engaged in UMP; this amount is significantly different from zero and similar to the effect of negative nominal interest rates. Thus, there is no evidence that countries have gained export markets through UMP; currency wars that have been launched have also been lost. UMP is also associated with a comparable drop in imports and exchange rates, suggesting that countries engage in UMP when they are experiencing adverse macroeconomic shocks concurrent with those that eviscerate international trade.