Year: 2006
Type: article
Abstract: In this paper we study the impact of more transparency in the foreign exchange market on the ex ante expected volume of international trade. Transparency is measured by the informational content of publicly observable signals. These signals convey information about the use of policy instruments which affect the future exchange rate. We find that a higher level of transparency may increase or decrease the volume of international trade. In particular, the impact of greater transparency depends on the curvature of the firms’ marginal cost function. Furthermore, the firms’ex ante expected profits are higher when the foreign exchange market is more transparent.
Authors: Udo Broll, Bernhard Eckwert
Institutions: Technische Universität Dresden, Bielefeld University
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1999092812