Working Paper: NBER ID: w24817
Authors: Andrew K. Rose
Abstract: 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-รก-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 unconventional monetary policy; 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.
Keywords: Unconventional Monetary Policy; Exports; Currency Wars; Quantitative Easing; Negative Nominal Interest Rates
JEL Codes: E58; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Unconventional Monetary Policy (UMP) (E52) | Exports (F10) |
| Unconventional Monetary Policy (UMP) (E52) | Imports (F14) |
| Quantitative Easing (QE) (E51) | Exports (F10) |
| Unconventional Monetary Policy (UMP) (E52) | Reduction in exports (F14) |