Summary: This paper analyzes how the exchange rate elasticity of exports has changed over time and across countries and sectors, and how the formation of Global Value Chains (GVCs) has affected this relationship. Using a panel framework covering 46 countries over the period 1996-2012, we first find evidence that the elasticity of manufacturing export volumes to the Real Effective Exchange Rate (REER) has decreased over time. We then examine whether the formation of supply chains has affected this elasticity using different measures of GVC integration. Intuitively, as countries are more integrated in global production processes, a currency depreciation only improves competitiveness of a fraction of the value of final good exports. In line with this intuition, we find evidence that the rise of GVC participation explains on average 40 percent of the fall in the elasticity and that corrections of the REER for GVC participation do not present the same decreasing pattern in elasticity.

Legal Disclaimer:

EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.