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Understanding recent developments in UK external trade

Author

Listed:
  • 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.

Suggested Citation

  • Kamath, Kishore & Paul, Varun, 2011. "Understanding recent developments in UK external trade," Bank of England Quarterly Bulletin, Bank of England, vol. 51(4), pages 294-304.
    • Handle: RePEc:boe:qbullt:0062
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    References listed on IDEAS

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    Cited by:

    1. Ian R. Gordon, 2016. "Quantitative easing of an international financial centre: how central London came so well out of the post-2007 crisis," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 9(2), pages 335-353.
    2. 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, vol. 52(1), pages 20-30.
    3. Chowla, Shiv & Quaglietti, Lucia & Rachel, Lukasz, 2014. "How have world shocks affected the UK economy?," Bank of England Quarterly Bulletin, Bank of England, vol. 54(2), pages 167-179.
    4. 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.
    5. Görg, Holger & Spaliara, Marina-Eliza, 2018. "Export market exit and financial health in crises periods," Journal of Banking & Finance, Elsevier, vol. 87(C), pages 150-163.
    6. Agyei-Ampomah, Sam & Mazouz, Khelifa & Yin, Shuxing, 2013. "The foreign exchange exposure of UK non-financial firms: A comparison of market-based methodologies," International Review of Financial Analysis, Elsevier, vol. 29(C), pages 251-260.

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