## Exchange Rates and Trade: A Disconnect?

_IMF Working Papers, March 15, 2017_

## Source details

**Canonical URL:** [Exchange Rates and Trade: A Disconnect?](https://www.imf.org/en/publications/wp/issues/2017/03/15/exchange-rates-and-trade-a-disconnect-44746)

## Other formats

- [Markdown version](/en/publications/wp/issues/2017/03/15/exchange-rates-and-trade-a-disconnect-44746/index.md)
- [Structured JSON version](/en/publications/wp/issues/2017/03/15/exchange-rates-and-trade-a-disconnect-44746/index.json)
- [Bundle manifest](/en/publications/wp/issues/2017/03/15/exchange-rates-and-trade-a-disconnect-44746/bundle-manifest.json)

## Bibliographic details
- Authors: Daniel Leigh, Weicheng Lian, Marcos Poplawski Ribeiro, Rachel Szymanski, Viktor Tsyrennikov, Hong Yang
- Published: March 15, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475587494.001

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### Overview
- Title: Exchange Rates and Trade: A Disconnect?
- Authors: Daniel Leigh, Weicheng Lian, Marcos Poplawski Ribeiro, Rachel Szymanski, Viktor Tsyrennikov, Hong Yang
- Date: March 15, 2017
- Series: Working Paper No. 2017/058
- Core summary: The paper examines the stability and strength of the relationship between exchange rates and trade over time using three alternative approaches that mitigate endogeneity. It finds that exchange rate pass-through and the price elasticity of trade volumes are largely stable over time; economic slack and financial conditions affect the relationship; limited evidence that participation in global value chains has significantly changed the exchange rate–trade relationship over time.

### Methods and Analytical Approach
- Uses three alternative approaches to examine the exchange rate–trade relationship.
- Explicitly addresses endogeneity of the relationship (mitigation of endogeneity is a methodological emphasis).
- Empirical focus on exchange rate pass-through and the price elasticity of trade volumes.

### Key Findings
- Exchange rate pass-through is largely stable over time.
- Price elasticity of trade volumes is largely stable over time.
- Economic slack affects the exchange rate–trade relationship.
- Financial conditions affect the exchange rate–trade relationship.
- There is limited evidence that participation in global value chains has significantly changed the exchange rate–trade relationship over time.

### Subjects and Keywords (as listed)
- Subjects: Depreciation, Exchange rate pass-through, Exchange rates, Export prices, Exports, Foreign exchange, International trade, National accounts, Prices
- Keywords: Africa, Asia and Pacific, Depreciation, depreciation episode, Europe, exchange rate disconnect, Exchange rate pass-through, exchange rate-trade, Exchange rates, exchange rates and trade, export price response, Export prices, Exports, Global, global trade, price elasticity, producer price index, real GDP, trade elasticity, trade equation, trade volume, WP

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## Content in this bundle

- **Exchange Rates and Trade: A Disconnect?, WP/17/58, March 2017**
  - [Exchange Rates and Trade: A Disconnect?, WP/17/58, March 2017 (Markdown version)](/-/media/files/publications/wp/2017/wp1758.pdf.md){rel="alternate" type="text/markdown"}
  - [Exchange Rates and Trade: A Disconnect?, WP/17/58, March 2017 (PDF)](/-/media/files/publications/wp/2017/wp1758.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2017/03/15/exchange-rates-and-trade-a-disconnect-44746_