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

 
Author/Editor: Oguro, Yoko ; Fukao, Kyoji ; Khatri, Yougesh
 
Publication Date: May 01, 2008
 
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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.
 
Series: Working Paper No. 08/134
Subject(s): India | Globalization | Monetary policy | Capital inflows | Economic conditions | Liquidity management

Author's Keyword(s): Trade | Exchange rates | Intra-industry trade
 
English
Publication Date: May 01, 2008
Format: Paper
Stock No: WPIEA2008134 Pages: 20
Price:
US$18.00 (Academic Rate:
US$18.00 )
 
 
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