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Understanding recent developments in UK external trade

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  • Kamath, Kishore

    ()
    (Bank of England)

  • Paul, Varun

    ()
    (Bank of England)

Abstract

The sterling effective exchange rate depreciated by around 25% between mid-2007 and early 2009. That has encouraged a shift towards UK exports and away from imports, contributing to a significant narrowing in the United Kingdom’s real trade deficit. This article explains these developments in more detail. It shows that the depreciation has induced considerable switching of expenditure by overseas companies and households towards UK goods exports, and by UK residents away from travel services imports. But financial services exports appear to have suffered from the financial crisis. And there seems to have been less of a response to the exchange rate depreciation in other services exports and non-travel imports. Looking ahead, both the level of sterling and developments in the rest of the world are likely to be crucial to the United Kingdom’s trade performance.

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File URL: http://www.bankofengland.co.uk/publications/quarterlybulletin/qb110401.pdf
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Bibliographic Info

Article provided by Bank of England in its journal Bank of England Quarterly Bulletin.

Volume (Year): 51 (2011)
Issue (Month): 4 ()
Pages: 294-304

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Handle: RePEc:boe:qbullt:0062

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  1. Leland Crane & Meredith Crowley & Saad Quayyum, 2007. "Understanding the evolution of trade deficits: trade elasticities of industrialized countries," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q IV, pages 2-17.
  2. Nigel Pain & Desirée van Welsum, 2004. "International Production Relocation and Exports of Services," OECD Economic Studies, OECD Publishing, OECD Publishing, vol. 2004(1), pages 67-94.
  3. Nigel Pain & Annabelle Mourougane & Franck Sédillot & Laurence Le Fouler, 2005. "The New OECD International Trade Model," OECD Economics Department Working Papers 440, OECD Publishing.
  4. Alan V. Deardorff & Saul H. Hymans & Robert M Stern & Chong Xiang, 2000. "Forecasting U.S. Trade in Services," Working Papers, Research Seminar in International Economics, University of Michigan 467, Research Seminar in International Economics, University of Michigan.
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Cited by:
  1. Berry, Stuart & Corder, Matthew & Williams, Richard, 2012. "What might be driving the need to rebalance in the United Kingdom?," Bank of England Quarterly Bulletin, Bank of England, Bank of England, vol. 52(1), pages 20-30.
  2. Chowla, Shiv & Quaglietti, Lucia & Rachel, Lukasz, 2014. "How have world shocks affected the UK economy?," Bank of England Quarterly Bulletin, Bank of England, Bank of England, vol. 54(2), pages 167-179.
  3. Burgess, Stephen & Fernandez-Corugedo, Emilio & Groth, Charlotta & Harrison, Richard & Monti, Francesca & Theodoridis, Konstantinos & Waldron, Matt, 2013. "The Bank of England's forecasting platform: COMPASS, MAPS, EASE and the suite of models," Bank of England working papers 471, Bank of England.

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