NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Ching-Yi Lin

Contact and additional information for this authorAll publicationsWorking Papers only

Working Papers

August 2010The Dynamic Effects of Currency Union on Trade
with Paul Bergin: w16259
A currency union's ability to increase international trade is one of the most debated questions in international macroeconomics. This paper studies the dynamics of these trade effects. First, an empirical study of the European Monetary Union finds that the extensive margin of trade (entry of new firms or goods) responds several years ahead of overall trade volume. This implies that the intensive margin (previously traded goods) falls in the run-up to EMU. The paper's theoretical contribution is to study the announcement of a future monetary union as a news shock to trade costs in the context of a dynamic stochastic general equilibrium trade model. Early entry of new firms in anticipation is explainable as a rational forward-looking response under certain conditions, where essential element...
June 2008Exchange Rate Regimes and the Extensive Margin of Trade
with Paul R. Bergin: w14126
This paper finds that currency unions and direct exchange rate pegs raise trade through distinct channels. Panel data analysis of the period 1973-2000 indicates that currency unions have raised trade predominantly at the extensive margin, the entry of new firms or products. In contrast, direct pegs have worked almost entirely at the intensive margin, increased trade of existing products. A stochastic general equilibrium model is developed to understand this result, featuring price stickiness and firm entry under uncertainty. Because both regimes tend to reliably provide exchange rate stability over the horizon of a year or so, which is the horizon of price setting, they both lead to lower export prices and greater demand for exports. But because currency unions historically are more durab...

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