Uncertainty, Flexible Exchange Rates, and Agglomeration /

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...

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Hlavní autor: Ricci, Luca
Médium: Časopis
Jazyk:English
Vydáno: Washington, D.C. : International Monetary Fund, 1998.
Edice:IMF Working Papers; Working Paper ; No. 1998/009
On-line přístup:Full text available on IMF
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490 1 |a IMF Working Papers 
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520 3 |a 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. 
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830 0 |a IMF Working Papers; Working Paper ;  |v No. 1998/009 
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