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Exchange rates, international trade and trade policies

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  • Alessandro Nicita

Abstract

This paper investigates the importance of exchange rates on international trade by analyzing the impact that exchange rate volatility and misalignment have on trade and then by exploring whether exchange rate misalignments affect governments' decisions regarding trade policies. The methodology consists of estimating fixed effects models on a detailed panel dataset comprising about 100 countries and 10 years (2000–2009). The findings of this study are generally in line with those of the recent literature in supporting the importance of exchange rate misalignment while finding that short term exchange rate volatility is generally not a serious concern. This paper also shows evidence supporting the argument that trade policy is used to compensate for some of the consequences of an overvalued currency, especially with regard to antidumping interventions.

Suggested Citation

  • Alessandro Nicita, 2013. "Exchange rates, international trade and trade policies," International Economics, CEPII research center, issue 135-136, pages 47-61.
  • Handle: RePEc:cii:cepiie:2013-q3-4-135-136-4
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    References listed on IDEAS

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    Cited by:

    1. Selena Begović & Sead Kreso, 2017. "The adverse effect of real effective exchange ratechange on trade balance in European transition countries," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics, vol. 35(1), pages 277-299.
    2. Dosse Toulaboe, 2017. "Real exchange rate misalignment of Asian currencies," Asian-Pacific Economic Literature, Asia Pacific School of Economics and Government, The Australian National University, vol. 31(1), pages 39-52, May.
    3. Campbell, Douglas L., 2016. "Measurement matters: Productivity-adjusted weighted average relative price indices," Journal of International Money and Finance, Elsevier, vol. 61(C), pages 45-81.
    4. Kang, Jong Woo, 2016. "International Trade and Exchange Rate," ADB Economics Working Paper Series 498, Asian Development Bank.
    5. Gor A. Khachatryan & Aleksandr Grigoryan, 2020. "Export Growth Dynamics and Real Exchange Rate: Evidence from Armenia," International Economic Journal, Taylor & Francis Journals, vol. 34(3), pages 493-509, July.
    6. Simbarashe Mhaka & Leward Jeke, 2018. "A comparative analysis of the determinants of South African bilateral trade flows with the European Union-Southern African Development Community economic partnership agreement and trade development an," Working Papers 1836, Department of Economics, Nelson Mandela University, revised Dec 2018.
    7. Rosalyn Perkins & Mary Caroline Castaño & Condrad Montemayor, 2018. "Analysis of predictability and accountability transparency practices and FTA on trade growth in selected countries of the Asia-Pacific region: a descriptive-causal approach," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 7(1), pages 1-18, December.
    8. Arif, Rabia & Jamil, Nida, 2018. "Proposed Methodology for Strategic Trade Policy to Achieve High Value Added Exports: A Case of Pakistan’s Textile Sector," MPRA Paper 90380, University Library of Munich, Germany.
    9. Laurent Didier, 2020. "Exchange rate regimes, trade in raw materials and exporters behavior: Evidence from some Small Island Developing States (SIDS)," Economics Bulletin, AccessEcon, vol. 40(4), pages 2894-2919.
    10. Alberto Behar & Armand Fouejieu, 2018. "External adjustment in oil exporters: The role of fiscal policy and the exchange rate," The World Economy, Wiley Blackwell, vol. 41(3), pages 926-957, March.
    11. Ely Susanti & Maimun Sholeh, 2020. "Indonesia Economic Growth Determinant: The Impact of Macro Economic Variables and International Trade," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 70-76.
    12. Adedayo Emmanuel Longe & Folake Adenola & Adewale Musliudeen Balogun & Shehu Muhammad, 2019. "Asymmetric and Non-Asymmetric Impact of Real Effective Exchange Rate on Trade in Nigeria," Izvestiya, Varna University of Economics, issue 4, pages 259-274.

    More about this item

    Keywords

    Trade Policy; International trade; Exchange rate;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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