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Global value chains and the exchange rate elasticity of exports

Author

Listed:
  • Ahmed Swarnali

    (International Monetary Fund, 700 19th Street, NW, Washington, DC 20431, USA)

  • Appendino Maximiliano

    (International Monetary Fund, 700 19th Street, NW, Washington, DC 20431, USA)

  • Ruta Michele

    (World Bank, 1818 H Street, Washington, DC 20433, USA)

Abstract

This paper analyzes how the formation of global value chains (GVCs) has affected the exchange rate elasticity of exports. Using a panel framework covering 46 countries over the period 1996–2012, we first find some suggestive evidence that the elasticity of real manufacturing exports to the real effective exchange rate (REER) has decreased over time. We then examine whether the formation of supply chains has affected this elasticity using different measures of GVC integration. Intuitively, 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. In line with this intuition, we find evidence that GVC participation reduces the REER elasticity of manufacturing exports by 22 percent, on average.

Suggested Citation

  • Ahmed Swarnali & Appendino Maximiliano & Ruta Michele, 2017. "Global value chains and the exchange rate elasticity of exports," The B.E. Journal of Macroeconomics, De Gruyter, vol. 17(1), pages 1-24, January.
    • Handle: RePEc:bpj:bejmac:v:17:y:2017:i:1:p:24:n:2
    DOI: 10.1515/bejm-2015-0130
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    More about this item

    Keywords

    export growth; global value chains; real exchange rate;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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