IDEAS home Printed from https://ideas.repec.org/a/bis/bisqtr/1109e.html
   My bibliography  Save this article

The trade balance and the real exchange rate

Author

Listed:
  • Enisse Kharroubi

Abstract

Globalisation has affected the relationship between the trade balance and the real exchange rate in two ways. On the one hand, the growth of trade taking place within industries makes the trade balance more sensitive to real exchange movements. On the other hand, a higher degree of vertical specialisation and more global supply chains act to reduce this sensitivity. The relative importance of these two effects varies across countries. According to the estimates presented in this article, changes in the real exchange rate could play a larger role in curbing the US trade deficit than in reducing the Chinese trade surplus. This confirms that real exchange rate adjustment is only part of the solution for global rebalancing, and needs to be accompanied by other policy actions.

Suggested Citation

  • Enisse Kharroubi, 2011. "The trade balance and the real exchange rate," BIS Quarterly Review, Bank for International Settlements, September.
    • Handle: RePEc:bis:bisqtr:1109e
    as

    Download full text from publisher

    File URL: http://www.bis.org/publ/qtrpdf/r_qt1109e.pdf
    Download Restriction: no
    File URL: http://www.bis.org/publ/qtrpdf/r_qt1109e.htm
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Elhanan Helpman & Paul Krugman, 1987. "Market Structure and Foreign Trade: Increasing Returns, Imperfect Competition, and the International Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 026258087x, December.
    2. World Bank, 2009. "The World Bank Annual Report 2009," World Bank Publications - Books, The World Bank Group, number 4354.
    3. Meng, Bo & Yamano, Norihiko & Webb, Colin, 2010. "Vertical specialisation indicator based on supply-driven input-output model," IDE Discussion Papers 270, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. World Bank, 2011. "The World Bank Annual Report 2011 [Banco Mundial - informe anual 2011 : reseña del ejercicio]," World Bank Publications - Books, The World Bank Group, number 2378.
    5. Yin-Wong Cheung & Menzie Chinn & Eiji Fujii, 2009. "Pitfalls in Measuring Exchange Rate Misalignment," Open Economies Review, Springer, vol. 20(2), pages 183-206, April.
    6. World Bank, 2009. "The World Bank Annual Report 2009," World Bank Publications - Books, The World Bank Group, number 4356.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Martin Mandel & Tran Van Quang, 2017. "Empirická verifikace exportní funkce s akcentem na vliv kurzu české koruny k euru [An Empirical Verification of Export Function Focused on the Impact of EUR/CZK Exchange Rate]," Politická ekonomie, Prague University of Economics and Business, vol. 2017(6), pages 649-668.
    2. Filip Pastucha, 2021. "Analysis of the export and import function of the Czech Republic: aggregate and structural view [Analýza exportní a importní funkce ČR - agregovaný a strukturální pohled]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2021(2), pages 5-26.
    3. Carlos A. Ibarra, 2014. "Trade, investment, and capital flows:Mexico's macroeconomic adjustment to the Great Recession," Working Paper Series Sobre México 2014002, Sobre México. Temas en economía.
    4. Erdal Ozmen & Duygu Yolcu-Karadam, 2014. "Structural Change in Turkish External Trade: Evidence from BEC Sectors," ERC Working Papers 1413, ERC - Economic Research Center, Middle East Technical University, revised Nov 2014.
    5. Joscha Beckmann & Mariarosaria Comunale, 2020. "Exchange rate fluctuations and the financial channel in emerging economies," Bank of Lithuania Working Paper Series 83, Bank of Lithuania.
    6. repec:zbw:bofitp:2021_011 is not listed on IDEAS
    7. Jonathan Kearns & Nikhil Patel, 2016. "Does the financial channel of exchange rates offset the trade channel?," BIS Quarterly Review, Bank for International Settlements, December.
    8. Joscha Beckmann & Mariarosaria Comunale, 2020. "Exchange rate fluctuations and the financial channel in emerging economies," Bank of Lithuania Working Paper Series 83, Bank of Lithuania.
    9. Rebecca Neumann & Saleh S. Tabrizy, 2021. "Exchange Rates and Trade Balances: Effects of Intra-Industry Trade and Vertical Specialization," Open Economies Review, Springer, vol. 32(3), pages 613-647, July.
    10. Sagnik Bagchi & Surajit Bhattacharyya, 2019. "Country-Specific Determinants of Intra-Industry Trade in India," Foreign Trade Review, , vol. 54(3), pages 129-158, August.
    11. repec:prg:jnlcfu:v:2021:y:2021:i:2:id:560 is not listed on IDEAS
    12. repec:ags:aaea22:335683 is not listed on IDEAS

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ali Burak Güven, 2012. "The IMF, the World Bank, and the Global Economic Crisis: Exploring Paradigm Continuity," Development and Change, International Institute of Social Studies, vol. 43(4), pages 869-898, July.
    2. Sabah Abdullah & Randall S. Rosenberger, 2012. "Controlling for Biases in Primary Valuation Studies: A Meta-analysis of International Coral Reef Values," Working Papers 2012.72, Fondazione Eni Enrico Mattei.
    3. Gemunu Nanayakkara, 2012. "Measuring the Performance of Microfinancing Institutions: A New Approach," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 13(1), pages 85-104, March.
    4. Sonal Devesh & Abdullah M. Asrul Affendi, 2021. "Modelling the Impact of Oil Price on Food Imports: Case of Oman," International Journal of Energy Economics and Policy, Econjournals, vol. 11(4), pages 113-120.
    5. Muhongayire, Wivine, 2012. "An Economic Assessment of the Factors Influencing Smallholder Farmers' Access to Formal Credit: A Case Study of Rwamagana District, Rwanda," Research Theses 198522, Collaborative Masters Program in Agricultural and Applied Economics.
    6. M.N. Tripathi, 2015. "Swachh Odisha: A Case on Attempting to Inculcate Healthy Sanitation Practices in Rural Odisha," Asian Journal of Management Cases, , vol. 12(2), pages 109-127, September.
    7. Junichi Fujimoto & Ko Munakata & Koji Nakamura & Yuki Teranishi, 2017. "Optimal Policy Analysis in a New Keynesian Economy with Credit Market Search," GRIPS Discussion Papers 16-30, National Graduate Institute for Policy Studies.
    8. Addison, Tony & Anand, Prathivadi Bhayankaram, 2012. "Aid and Infrastructure Financing: Emerging Challenges with a Focus on Africa," WIDER Working Paper Series 056, World Institute for Development Economic Research (UNU-WIDER).
    9. Chinenye Ifeoma Nwokolo & Matthew Ikechukwu Ogbuagu & Wakeel Atanda Isola, 2021. "Migrant’s remittance and investment financing nexus in Africa: Does investment climate matter?," Future Business Journal, Springer, vol. 7(1), pages 1-11, December.
    10. Claude Ménard & Aleksandra Peeroo, 2011. "Liberalization in the Water Sector: Three Leading Models," Chapters, in: Matthias Finger & Rolf W. Künneke (ed.), International Handbook of Network Industries, chapter 18, Edward Elgar Publishing.
    11. Atta Khan & Abdul Saboor & Abid Hussain & Shumaila Sadiq & Abdul Mohsin, 2014. "Investigating Multidimensional Poverty across the Regions in the Sindh Province of Pakistan," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 119(2), pages 515-532, November.
    12. World Bank, 2012. "Agribusiness Indicators," World Bank Publications - Reports 26563, The World Bank Group.
    13. Marcelo Sánchez, 2012. "Structural Reform and Transparency in a Monetary Union," Open Economies Review, Springer, vol. 23(3), pages 559-577, July.
    14. Barron, Manuel & Torero, Maximo, 2017. "Household electrification and indoor air pollution," Journal of Environmental Economics and Management, Elsevier, vol. 86(C), pages 81-92.
    15. Leonardo Vera & Albany Hernández & Dorelia Osorio, 2013. "¿Puede el desarrollo financiero promover el desarrollo humano? Evidencia para Venezuela," Revista Finanzas y Politica Economica, Universidad Católica de Colombia, vol. 5(1), pages 23-42, June.
    16. Gemunu Nanayakkara & Lokman Mia, 2016. "Does product diversification and emphasis on profitability in microfinancing alleviate poverty?," Asia-Pacific Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 23(1), pages 21-56, June.
    17. Joel , ISABIRYE, 2021. "Impact Of Economic Crises On Firms: A Literature Review," Annals of Spiru Haret University, Economic Series, Universitatea Spiru Haret, vol. 21(3), pages 225-250.
    18. Tabak, Benjamin M. & de Castro Miranda, Rodrigo & da Silva Medeiros, Maurício, 2016. "Contagion in CDS, banking and equity markets," Economic Systems, Elsevier, vol. 40(1), pages 120-134.
    19. Jacques Zeelen, 2012. "Universities in Africa: Working on Excellence for Whom? Reflections on Teaching, Research, and Outreach Activities at African Universities," International Journal of Higher Education, Sciedu Press, vol. 1(2), pages 157-157, November.
    20. Jovanovic, Branimir & Petreski, Marjan, 2014. "Monetary policy, exchange rates and labor unions in SEE and the CIS during the financial crisis," Economic Systems, Elsevier, vol. 38(3), pages 309-332.

    More about this item

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bis:bisqtr:1109e. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Martin Fessler (email available below). General contact details of provider: https://edirc.repec.org/data/bisssch.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.