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Exchange rate crises and bilateral trade flows in Latin America

Author

Listed:
  • Campa, Jose M.

    (IESE Business School)

Abstract

This paper looks at the behavior of trade flows in eight countries in Latin America that experienced an extreme nominal exchange rate depreciation. The composition of trade flows shows a very persistent pattern around these episodes of large exchange rate movements. Both the industry composition of trade and the country composition of trading partners remain stable after the devaluation occurs. The relative importance of export and import industries in the countries' trade flows does not vary substantially, nor does the importance of the different source countries for imports and destination countries for exports. Exports to industrialized countries are especially sensitive to changes in the real exchange rate, while bilateral import flows do not show much reaction to changes in bilateral exchange rates.

Suggested Citation

  • Campa, Jose M., 2002. "Exchange rate crises and bilateral trade flows in Latin America," IESE Research Papers D/470, IESE Business School.
    • Handle: RePEc:ebg:iesewp:d-0470
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    File URL: http://www.iese.edu/research/pdfs/DI-0470-E.pdf
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    References listed on IDEAS

    as
    1. Campa, Jose Manuel & Goldberg, Linda S, 1999. "Investment, Pass-Through, and Exchange Rates: A Cross-Country Comparison," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 287-314, May.
    2. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
    3. Roberto Chang & Andrés Velasco, 2000. "Liquidity Crises in Emerging Markets: Theory and Policy," NBER Chapters,in: NBER Macroeconomics Annual 1999, Volume 14, pages 11-78 National Bureau of Economic Research, Inc.
    4. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    5. Jose Manuel Campa & Linda S. Goldberg, 1997. "The evolving external orientation of manufacturing: a profile of four countries," Economic Policy Review, Federal Reserve Bank of New York, vol. 3(Jul), pages 53-81.
    6. Pinelopi Koujianou Goldberg & Michael M. Knetter, 1997. "Goods Prices and Exchange Rates: What Have We Learned?," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1243-1272, September.
    7. Obstfeld, Maurice, 1996. "Models of currency crises with self-fulfilling features," European Economic Review, Elsevier, vol. 40(3-5), pages 1037-1047, April.
    8. Glick, Reuven & Rose, Andrew K., 1999. "Contagion and trade: Why are currency crises regional?," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 603-617, August.
    9. Amartya Lahiri & Carlos A. Vegh, 2000. "Delaying the Inevitable: Optimal Interest Rate Policy and BOP Crises," NBER Working Papers 7734, National Bureau of Economic Research, Inc.
    10. Jose Campa & Linda S. Goldberg, 1997. "The Evolving External Orientation of Manufacturing Industries: Evidence from Four Countries," NBER Working Papers 5919, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Nicolas Berman & Philippe Martin, 2012. "The Vulnerability of Sub-Saharan Africa to Financial Crises: The Case of Trade," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 60(3), pages 329-364, September.
    2. repec:hal:spmain:info:hdl:2441/lj8ndsutc8i5ast4viool3gqa is not listed on IDEAS
    3. Nicolas Berman & Antoine Berthou, 2009. "Financial Market Imperfections and the Impact of Exchange Rate Movements on Exports," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 103-120, February.
    4. Nicolas Berman, 2009. "Financial Crises and International Trade: The Long Way to Recovery," Economics Working Papers ECO2009/23, European University Institute.
    5. Joseph P. Byrne & Aditya S. Chavali & Alexandros Kontonikas., 2010. "Exchange Rate Pass Through To Import Prices: Panel Evidence From Emerging Market Economies," Working Papers 2010_19, Business School - Economics, University of Glasgow.
    6. Isabel Ruiz, 2005. "Exchange Rate as a Determinant of Foreign Direct Investment: Does it Really Matter? Theoretical Aspects, Literature Review and Applied Proposal," International Trade 0511016, University Library of Munich, Germany.
    7. HOLMES, Mark J, 2008. "Non-Linear Trend Stationarity And Co-Trending In Latin American Real Exchange Rates," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 8(1), pages 107-118.

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    More about this item

    Keywords

    Trade flows; bilateral trade; exchange rate; devaluation;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General

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