Exchange Rate Movements and Their Impact on Trade and Investment in the APEC Region

Occasional Papers, December 4, 1996

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Title: Exchange Rate Movements and Their Impact on Trade and Investment in the APEC Region
Authors: Takatoshi Ito, Tamim Bayoumi, Peter Isard, Steven A. Symansky
Publication date: December 4, 1996
Scope: Examines how medium and long-term changes in real exchange rates have affected international (and intra-APEC) trade and investment across the 18 members of the Asia-Pacific Economic Cooperation Council (APEC).
Central observation: Rapid growth in many APEC economies has been facilitated by high levels of investment and trade, international linkages, and macroeconomic policies that have sustained growth while not sparking excessive inflation.

Geographic and development heterogeneity:
- The 18 APEC members encompass a wide geographic area and broad differences in stages of economic development, including some of the fastest-growing economies in the world.
Role of exchange rates:
- The study offers insights about how medium and long-term changes in real exchange rates have affected international and intra-APEC trade and investment in the region.
Macro policy context:
- In most APEC economies, macroeconomic policies have sustained growth without sparking excessive inflation, supporting trade and investment expansion.

Emphasis on understanding real exchange rate movements over medium and long horizons as a determinant of trade and foreign direct investment (FDI).
Relevance for policies that influence:
- Exchange rate adjustments
- Balance of payments
- Promotion of exports and FDI inflows/outflows
- Management of real effective exchange rates for tradable goods