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Accounting for the stability of the UK terms of trade


  • Mac Coille, Conall

    () (Bank of England)

  • Mayhew, Karen

    () (Bank of England)

  • Turnbull, Kenny

    () (Bank of England)


Since the middle of 2007, the sterling effective exchange rate has depreciated significantly. Over the same period the UK terms of trade — the price of the United Kingdom’s exports relative to imports — have remained broadly unchanged. Movements in the exchange rate can affect the price of exports relative to imports. But the timing, size and even direction of the impact on the terms of trade will depend on how companies respond to the movement in the exchange rate. This article considers the factors that determine how the terms of trade move in response to an exchange rate depreciation, and investigates what lies behind the stability of the UK terms of trade since 2007.

Suggested Citation

  • Mac Coille, Conall & Mayhew, Karen & Turnbull, Kenny, 2009. "Accounting for the stability of the UK terms of trade," Bank of England Quarterly Bulletin, Bank of England, vol. 49(4), pages 286-292.
  • Handle: RePEc:boe:qbullt:0010

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    References listed on IDEAS

    1. Madhavan, Ananth, 2000. "Market microstructure: A survey," Journal of Financial Markets, Elsevier, vol. 3(3), pages 205-258, August.
    2. Toni Gravelle, 2002. "The Microstructure of Multiple-Dealer Equity and Government Securities Markets: How They Differ," Staff Working Papers 02-9, Bank of Canada.
    3. Bruno Biais & David Martimort & Jean-Charles Rochet, 2000. "Competing Mechanisms in a Common Value Environment," Econometrica, Econometric Society, vol. 68(4), pages 799-838, July.
    4. Kathryn Chen & Michael J. Fleming & John Jackson & Ada Li & Asani Sarkar, 2011. "An analysis of CDS transactions: implications for public reporting," Staff Reports 517, Federal Reserve Bank of New York.
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