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Exchange Rates and Trade; A Disconnect?

Author

Listed:
  • Daniel Leigh
  • Weicheng Lian
  • Marcos Poplawski-Ribeiro
  • Rachel Szymanski
  • Viktor Tsyrennikov
  • Hong Yang

Abstract

We examine the stability and strength of the relationship between exchange rates and trade over time using three alternative approaches, mitigating the endogeneity of the relation. We find that both exchange rate pass-through and the price elasticity of trade volumes are largely stable over time. Economic slack and financial conditions affect the relationship, but there is limited evidence that participation in global value chains has significantly changed the exchange rate–trade relationship over time.

Suggested Citation

  • Daniel Leigh & Weicheng Lian & Marcos Poplawski-Ribeiro & Rachel Szymanski & Viktor Tsyrennikov & Hong Yang, 2017. "Exchange Rates and Trade; A Disconnect?," IMF Working Papers 17/58, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:17/58
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    References listed on IDEAS

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    Keywords

    Foreign exchange; Global trade; exchange rate disconnect; exchange rates and trade; Country and Industry Studies of Trade; Open Economy Macroeconomics;

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