Exchange Rates and Trade: A Disconnect?

By Daniel Leigh, Weicheng Lian, Marcos Poplawski Ribeiro, Rachel Szymanski, Viktor Tsyrennikov, Hong Yang

March 15, 2017

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Format: Chicago

Daniel Leigh, Weicheng Lian, Marcos Poplawski Ribeiro, Rachel Szymanski, Viktor Tsyrennikov, and Hong Yang. Exchange Rates and Trade: A Disconnect?, (USA: International Monetary Fund, 2017) accessed September 26, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We examine the stability and strength of the relationship between exchange rates and trade over time using three alternative approaches, mitigating the endogeneity of the relation. We find that both exchange rate pass-through and the price elasticity of trade volumes are largely stable over time. Economic slack and financial conditions affect the relationship, but there is limited evidence that participation in global value chains has significantly changed the exchange rate–trade relationship over time.

Subject: Depreciation, Exchange rate pass-through, Exchange rates, Export prices, Exports, Foreign exchange, International trade, National accounts, Prices

Keywords: Africa, Asia and Pacific, Depreciation, Depreciation episode, Europe, Exchange rate disconnect, Exchange rate pass-through, Exchange rates, Exchange rates and trade, Exchange rate-trade, Export price response, Export prices, Exports, Global, Global trade, Price elasticity, Producer price index, Real GDP, Trade elasticity, Trade equation, Trade volume, WP

Publication Details

Pages:

52
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2017/058
Stock No:

WPIEA2017058
ISBN:

9781475587494
ISSN:

1018-5941

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