2020/12/28 by Hakan Yilmazkuday · 1 voice
Economics, Econometrics and Finance · #Global Financial Crisis and Policies #Global trade and economics #Monetary Policy and Economic Impact
paper · doi:10.1111/infi.12385
openalex publication_date 2020/12/28 · openalex created_date 2025/10/10 · openalex updated_date 2026/05/21
Abstract This paper shows that bilateral currency crises reduce bilateral trade up to 50% after controlling for the depreciation rate. Using a trade model, these reductions are connected to the welfare costs of currency crises. The results show that a single currency crisis can result in welfare reductions through changes in international trade corresponding to more than 10% (and up to 41%) of the costs of autarky for 23 different currency crisis episodes between 1960 and 2014. These welfare costs are also shown to be greater than the welfare gains from having free trade agreements and using common currencies for 25 different currency crisis episodes.