Author : Mr.Luca Antonio Ricci
Publisher : International Monetary Fund
ISBN 13 : 1451927355
Total Pages : 35 pages
Book Rating : 4.51/5 ( download)
Book Synopsis Uncertainty, Flexible Exchange Rates, and Agglomeration by : Mr.Luca Antonio Ricci
Download or read book Uncertainty, Flexible Exchange Rates, and Agglomeration written by Mr.Luca Antonio Ricci and published by International Monetary Fund. This book was released on 1998-02-01 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper shows that exchange rate variability promotes agglomeration of economic activity. Under flexible rates, firms located in large markets have lower variability of sales, reinforcing concentration of firms there. Empirical evidence on OECD countries demonstrates (1) that the negative effect of country size on variability of industrial production is stronger after the 1973 collapse of fixed rates and (2) for small (large) countries, exchange rates variability has a long-run negative (positive) effect on net inward FDI flows. Two implications arise: creating a currency area fosters agglomeration in the area, and a two-stage EMU may exacerbate the current uneven regional development.