Mariana Colacelli

Abstract: Many cases exist of multiple currency usage throughout history. As two leading examples, secondary currencies were widespread during both the Great Depression in the United States and the 2002 recession in Argentina. What are the determinants of multiple currency usage and what is the effect on economic activity? We address these issues here empirically, using individual-level surveys collected by the authors in Argentina during 2002 and 2003. The evidence supports the theoretically predicted determinants of secondary currency acceptability put forth in monetary theory. In particular we find that the acceptability of the secondary currency increases when the supply of national currency is low, the relative seigniorage of the secondary currency is low, and the individual trading technologies are less effective. Moreover we find that the acceptability of the secondary currency has real effects on economic activity. Among those who use the secondary currency the monthly gain is more than 15 percent of the average Argentine's monthly income. This effect aggregates to 0.6 percent of GDP. The estimated semi-elasticity between the proportion of population that accepts the secondary currency and GDP is 0.083.

Abstract: This paper empirically investigates the differential effects of real depreciations on exports, both by size of the depreciation and by sector, and I present an explanation for the estimated pattern. Differential effects are defined as significantly different export response elasticities for large real depreciations versus small ones versus real appreciations, faced by different sectors of the economy. These empirical relationships are not currently measured in the literature under a unified framework. Classifying the sectors based on their product differentiation, I find that differentiated sectors have a declining response elasticity of exports for larger depreciations and that homogeneous sectors have a constant response elasticity of exports. I use 4-digit, sector-level bilateral trade data for 100 countries for the period from 1980 to 1997. This evidence helps explain why some countries that experience large depreciations, exporting differentiated products, do not experience a proportional reaction in their exports. A model is developed where differentiated sectors face startup costs, borrowing constraints, and/or informational asymmetries to explain the observed pattern.