Global Value Chains and the Exchange Rate Elasticity of Exports

By Swarnali A Hannan, Maximiliano Appendino, Michèle Ruta

November 30, 2015

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Format: Chicago

Swarnali A Hannan, Maximiliano Appendino, and Michèle Ruta. Global Value Chains and the Exchange Rate Elasticity of Exports, (USA: International Monetary Fund, 2015) accessed December 3, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes how the formation of Global Value Chains (GVCs) has affected the exchange rate elasticity of exports. Using a panel framework covering 46 countries over the period 1996-2012, we first find some suggestive evidence that the elasticity of real manufacturing exports to the Real Effective Exchange Rate (REER) has decreased over time. We then examine whether the formation of supply chains has affected this elasticity using different measures of GVC integration. Intuitively, as countries are more integrated in global production processes, a currency depreciation only improves competitiveness of a fraction of the value of final good exports. In line with this intuition, we find evidence that GVC participation reduces the REER elasticity of manufacturing exports by 22 percent, on average.

Subject: Exchange rate adjustments, Exchange rates, Exports, Foreign exchange, International trade, Real effective exchange rates, Real exchange rates

Keywords: Change elasticity, Elasticity, Exchange rate adjustments, Exchange rates, Export, Export deflator, Export Growth, Export surge, Export volume, Exports, Global, Global Value Chains, GVC participation, Industriesin GVCs, Manufacturing export, Real effective exchange rates, Real Exchange Rate, Real exchange rates, REER change, REER elasticity, Value-added export, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2015/252
Stock No:

WPIEA2015252
ISBN:

9781513531793
ISSN:

1018-5941

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