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Devaluation, Relative Prices, and International Trade; Evidence From Developing Countries

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  • Carmen Reinhart

Abstract

Devaluation is an integral part of adjustment in many developing countries, particularly relied upon by countries facing large external imbalances. A devaluation can only reduce trade imbalances if it translates to a real devaluation and if trade flows respond to relative prices in a significant and predictable manner. However, a recent strand in the empirical trade literature has questioned the existence of a stable relationship between trade flows and its traditional determinants. This paper re-examines the relationship between relative prices and imports and exports in a sample of 12 developing countries.

Suggested Citation

  • Carmen Reinhart, 1994. "Devaluation, Relative Prices, and International Trade; Evidence From Developing Countries," IMF Working Papers 94/140, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:94/140
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    References listed on IDEAS

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    More about this item

    Keywords

    Exports; International trade; Imports; cointegration; trade flows; import demand; equation; developing country exports;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F1 - International Economics - - Trade

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