Choose Your Weapon: International Trade Agreements and Exchange Rate Policy Choice
Copelovitch, Mark S.
Pevehouse, Jon C.
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This paper examines the question of whether governments engage in "exchange rate protection" - that is, whether they actively manipulate the exchange rate and/or utilize exchange rate fluctuations as a lever to influence the terms of trade. Using data on 21 countries from 1975-1999, the paper identifies specific conditions under which governments use exchange rate policy as a substitute for trade protection.