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Devaluation, Relative Prices, and International Trade

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  • Carmen Reinhart

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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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 94/140.

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Length: 30
Date of creation: 01 Nov 1994
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Handle: RePEc:imf:imfwpa:94/140

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