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Trade Sensitivity to Exchange Rates in the Context of Intra-Industry Trade

This paper theoretically and empirically investigates export sensitivity to exchange rates in the context of intra-industry trade (IIT). It is assumed that more IIT implies a smaller elasticity of substitution among differentiated products and vice versa. The model presented suggests the gap in prod...

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Bibliographic Details
Main Author: Oguro, Yoko
Other Authors: Fukao, Kyoji, Khatri, Yougesh
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2008
Series:IMF Working Papers
Subjects:
Government And The Monetary System
Payment Systems
Balance Of Trade
Monetary Economics
Currency; Foreign Exchange
Regimes
Trade Balance
Trade: General
Exports And Imports
International Economics
Money
Foreign Exchange
Standards
Exports
Currencies
Monetary Systems
Real Exchange Rates
Exchange Rates
Empirical Studies Of Trade
Money And Monetary Policy
China, People's Republic Of
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary:This paper theoretically and empirically investigates export sensitivity to exchange rates in the context of intra-industry trade (IIT). It is assumed that more IIT implies a smaller elasticity of substitution among differentiated products and vice versa. The model presented suggests the gap in production costs between two countries has an influence on IIT as well. Industry-level pane regressions of thirty-eight trading pairs provide strong empirical support for the idea that the exchange rate sensitivity of exports declines in concert with the extent of ITT. An obvious policy implication is that the effectiveness of exchange rates in addressing trade imbalances will diminish as the extent of IIT increases
Physical Description:20 pages
ISBN:9781451869934

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