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Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries

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  • Carmen M. Reinhart

    (International Monetary Fund)

Abstract

Devaluation is an integral part of adjustment in many developing countries, particularly relied upon by countries facing large external imbalances. A devaluation can only reduce trade imbalances if it translates to a real devaluation and if trade flows respond to relative prices in a significant and predictable manner. However, a recent strand in the empirical trade literature has questioned the existence of a stable relationship between trade flows and its traditional determinants. This paper re-examines the relationship between relative prices and imports and exports in a sample of 12 developing countries.

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Article provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.

Volume (Year): 42 (1995)
Issue (Month): 2 (June)
Pages: 290-312

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Handle: RePEc:pal:imfstp:v:42:y:1995:i:2:p:290-312

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