Global Value Chains and the Exchange Rate Elasticity of Exports
IMF Working Papers, November 30, 2015
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- Global Value Chains and the Exchange Rate Elasticity of Exports
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Bibliographic details
- Authors: Swarnali A Hannan, Maximiliano Appendino, Michele Ruta
- Published: November 30, 2015
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513531793.001
Summary and research question
- This paper analyzes how the formation of Global Value Chains (GVCs) has affected the exchange rate elasticity of exports.
- Primary question: Has GVC integration changed the elasticity of real manufacturing exports to the Real Effective Exchange Rate (REER)?
Data and empirical framework
- Panel framework covering 46 countries over the period 1996-2012.
- Focus: elasticity of real manufacturing exports to the Real Effective Exchange Rate (REER).
- Pages: 28; Volume: 2015; Issue: 252; Series: Working Paper No. 2015/252; DOI: https://doi.org/10.5089/9781513531793.001; ISBN: 9781513531793; ISSN: 1018-5941.
Key findings
- The elasticity of real manufacturing exports to the REER has suggestive evidence of decreasing over time.
- GVC participation reduces the REER elasticity of manufacturing exports by 22 percent, on average.
- Intuition provided: 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.
Implications for exchange rate adjustments and trade policy
- Exchange rate depreciations may have weaker effects on manufacturing export volumes when production is fragmented across borders.
- Policies relying on currency depreciation to boost manufacturing exports should account for the extent of a country’s GVC participation.
- Understanding the share of imported intermediate inputs embodied in exports is crucial for assessing the pass-through from exchange rates to export competitiveness.
Subjects and keywords (as listed)
- Subjects: Exchange rate adjustments, Exchange rates, Exports, Foreign exchange, International trade, Real effective exchange rates, Real exchange rates
- Keywords: change elasticity, elasticity, Exchange rate adjustments, Exchange rates, export, export deflator, Export Growth, export surge, export volume, Exports, Global, Global Value Chains, GVC participation, Industriesin GVCs, manufacturing export, Real effective exchange rates, Real Exchange Rate, Real exchange rates, REER change, REER elasticity, value-added export, WP
Authors and publication details
- By Swarnali A Hannan, Maximiliano Appendino, Michele Ruta
- November 30, 2015
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.