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International trade and exchange rates

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  • Jong Woo Kang
  • Suzette Dagli

Abstract

This paper analyzes the link between international trade and exchange rate levels in the context of the global financial crisis (GFC) and the rise of global and regional value chains (GVCs). Using bilateral data for 72 economies over the 2001–2015 period, we find a positive relationship between the real exchange rate and export volume pre-GFC; but this relationship mostly disappears post-GFC. We also examine the impact of deepening GVCs on trade and on the exchange rate-trade link channel. The analysis confirms that increased participation in GVCs lowers the impact of the exchange rate on exports, and could be a contributing factor to weakening links between exchange rates and trade. Lastly, other structural factors, such as import composition and stock of short-term external debt of exporters and importers, seem to have a significant impact on trade performance but less impact on the exchange rate-trade link channel post-GFC.

Suggested Citation

  • Jong Woo Kang & Suzette Dagli, 2018. "International trade and exchange rates," Journal of Applied Economics, Taylor & Francis Journals, vol. 21(1), pages 84-105, January.
    • Handle: RePEc:taf:recsxx:v:21:y:2018:i:1:p:84-105
    DOI: 10.1080/15140326.2018.1526878
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    Cited by:

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    3. Lucie Coufalová, 2020. "Sankce západních zemí a ruská odvetná opatření: dopad na české exporty [Sanctions by Western Countries and Russian Countermeasures: Impact on Czech Exports]," Politická ekonomie, Prague University of Economics and Business, vol. 2020(3), pages 348-366.
    4. Ahmad Ahmad, 2023. "Financial Development, Exchange Rate Stability and Trade in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(11), pages 1552-1557, November.
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    8. Cong, Shufeng & Chin, Lee & Kumarusamy, Risidaxshinni, 2024. "Does Trade Freedom Affect Exchange Rate Movement? A perspective of High-Technology Trade," MPRA Paper 126888, University Library of Munich, Germany.
    9. Ray-Ming Chen, 2022. "Does the growth of military hard power back up the growth of monetary soft power via data-driven probabilistic optimal relations?," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 9(1), pages 1-6, December.
    10. Cengiz Tunç & M. Nihat Solakoglu, 2025. "Exchange Rate Volatility and Firms’ Export Decisions: Evidence from Exporter Dynamics Database," Open Economies Review, Springer, vol. 36(2), pages 651-677, April.
    11. Thomas Goda & Alejandro Torres Garc�a & Cristhian David Larrahondo Dominguez, 2021. "Sectoral real exchange rates and manufacturing exports: A case study of Latin America," Documentos de Trabajo de Valor Público 19286, Universidad EAFIT.
    12. Thomas Goda & Alejandro Torres García & Cristhian Larrahondo, 2024. "Real exchange rates and manufacturing exports in emerging economies: the role of sectoral heterogeneity and product complexity," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 160(3), pages 1057-1082, August.
    13. Adedotun Joseph Adenigbo & Joash Mageto & Rose Luke, 2023. "Effect of shipping trade on economic growth in Nigeria: the Vector Error Correction Model (VECM) approach," Journal of Shipping and Trade, Springer, vol. 8(1), pages 1-18, December.
    14. Muhamet J. Spahiu & John McArdle & Betim J. Spahiu & Esat Durguti, 2024. "Effects of Broadband and Telephone Subscription on Exports in New Global Era: Evidence from Southeast European Countries," Central European Business Review, Prague University of Economics and Business, vol. 2024(3), pages 31-47.
    15. Peter Nuhu & Dramani Bukari, 2021. "An analysis of export, import and exchange rate oscillation in Ghana," International Journal of Economic Policy Studies, Springer, vol. 15(2), pages 301-327, September.
    16. Wenbo Jia & Hao Jiang & Yiqing Lyv & Stavros Sindakis, 2025. "Uncertainty’s Effect on China’s Knowledge-Based Economy: Transformation Beyond Trade," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(1), pages 4684-4725, March.
    17. 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.
    18. Chortane, Sana Gaied & Pandey, Dharen Kumar, 2022. "Does the Russia-Ukraine war lead to currency asymmetries? A US dollar tale," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).
    19. Busani Moyo, 2024. "Impact of SADC Free Trade Area on Southern Africa’s Intra-Trade Performance: Implications for the African Continental Free Trade Area," Foreign Trade Review, , vol. 59(1), pages 146-180, February.
    20. Gavin Ooft & Philip Hans Franses & Sailesh Bhaghoe, 2023. "Autoregressive conditional durations: An application to the Surinamese dollar versus the US dollar exchange rate," Review of Development Economics, Wiley Blackwell, vol. 27(4), pages 2618-2637, November.
    21. Akhil Sharma & Tarun Vashishat & Abdul Rishad, 2019. "The consequences of exchange rate trends on international tourism demand: evidence from India," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 21(2), pages 270-287, December.
    22. Oluwatomisin J. Oyewole & Damilola M. Ibidun & Mamdouh Abdulaziz Saleh Al-Faryan, 2024. "Trade shocks and real effective exchange rates dynamics in Nigeria," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 23(2), pages 335-354, May.
    23. Kim, Min-Joon, 2024. "Vietnam's exports to Korea and the real exchange rate: Post-crisis evidence from the multiple threshold nonlinear autoregressive distributed lag model," Economic Analysis and Policy, Elsevier, vol. 84(C), pages 679-692.
    24. Tian, Qingsong & Yu, Yan & Xu, Yueyan & Li, Chongguang & Liu, Nianjie, 2023. "Patterns and driving factors of agricultural virtual water imports in China," Agricultural Water Management, Elsevier, vol. 281(C).

    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F10 - International Economics - - Trade - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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