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

November 1, 1994

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Exports, Imports, International trade, National accounts, Personal income, Price elasticity, Prices, Trade balance

Keywords: Africa, Asia and Pacific, developing country export, Exports, import demand, Imports, income elasticity, Personal income, Price elasticity, relative price, Trade balance, utility function, WP

Pages:
30
Volume:
1994
DOI:
https://doi.org/10.5089/9781451928679.001
Issue:
140
Series:
Working Paper No. 1994/140
Stock No:
WPIEA1401994
ISBN:
9781451928679
ISSN:
1018-5941

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Notes

Examines on the relationship between relative prices and imports and exports in a sample of 12 developing countries. Also published in Staff Papers, Vol. 42, No. 2, June 1995.

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