Stable exchange rates boost trade, but only if actions match words.
The study looked at how different types of exchange rate systems affect international trade. They found that fixed exchange rates can boost trade, especially when what is promised matches what is actually done. Having a stable exchange rate system helps trade more when words and actions align. It's important for countries to stick to their exchange rate policies to avoid negative consequences. The impact of currency unions and direct pegs on trade changes over time. Stable exchange rate systems have different effects on trade depending on the country.