Jump to ContentJump to Main Navigation
Show Summary Details
More options …

The B.E. Journal of Macroeconomics

Editor-in-Chief: Cavalcanti, Tiago / Kambourov, Gueorgui

Ed. by Abraham, Arpad / Carceles-Poveda , Eva / Debortoli, Davide / Lambertini, Luisa / Nimark, Kristoffer / Wang, Pengfei

2 Issues per year


IMPACT FACTOR 2017: 0.378
5-year IMPACT FACTOR: 0.462

CiteScore 2017: 0.62

SCImago Journal Rank (SJR) 2017: 0.553
Source Normalized Impact per Paper (SNIP) 2017: 0.605

Online
ISSN
1935-1690
See all formats and pricing
More options …

Global value chains and the exchange rate elasticity of exports

Swarnali Ahmed / Maximiliano Appendino / Michele Ruta
Published Online: 2016-06-22 | DOI: https://doi.org/10.1515/bejm-2015-0130

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.

Keywords: export growth; global value chains; real exchange rate

JEL Classification: F14; F15; F31

References

  • Amiti, Mary, Oleg Itskhoki, and Jozef Konings (2014). “Importers, Exporters, and Exchange Rate Disconnect.” American Economic Review 104 (7): 1942–1978.CrossrefWeb of ScienceGoogle Scholar

  • Antràs, Pol, Davin Chor, Thibault Fally, and Russell Hillberry (2012). “Measuring the Upstreamness of Production and Trade Flows.” American Economic Review Papers and Proceedings 102 (3): 412–416.CrossrefGoogle Scholar

  • Auboin, Marc, and Michele Ruta (2013). “The Relationship Between Exchange Rates and International Trade: A Literature Review.” World Trade Review 12 (3): 577–605.Web of ScienceCrossrefGoogle Scholar

  • Bayoumi, Tamim, Mika Saito, and Jarkko Turunen (2013). “Measuring Competitiveness: Trade in Goods or in Tasks?” IMF Working Paper 13/100, Washington: International Monetary Fund.Google Scholar

  • Bems, Rudolfs and Robert C. Johnson (2012). “Value-Added Exchange Rates.” NBER Working Paper No. 18498, Cambridge, MA: The National Bureau of Economic Research.Google Scholar

  • Bems, Rudolfs and Robert C. Johnson (2015). “Demand for Value Added and Value-Added Exchange Rates.” forthcoming IMF Working Paper.Google Scholar

  • Berman Nicolas, Philippe Martin and Thierry Mayer (2012). “How do Different Exporters React to Exchange Rate Changes?” Quarterly Journal of Economics 127 (1): 437–492.CrossrefWeb of ScienceGoogle Scholar

  • Bown, Chad P. and Meredith A. Crowley, (2013). “Import Protection, Business Cycles, and Exchange Rates: Evidence from the Great Recession.” Journal of International Economics 90 (1): 50–64.CrossrefGoogle Scholar

  • Chen, Natalie and Luciana Juvenal (2013). “Quality, Trade, and Exchange Rate Pass-Through.” CEPR Discussion Paper 9744.Google Scholar

  • Constantinescu, C., A. Mattoo and M. Ruta (2015). “The Global Trade Slowdown: Cyclical or Structural?” IMF Working Paper No. 15/6, Washington, DC.Google Scholar

  • Di Nino, Virginia, Barry Eichengreen and Massimo Sbracia (2011). “Real Exchange Rates, Trade and Growth: Italy 1861–2011.” Bank of Italy Economic History Working Papers, No. 10.Google Scholar

  • Duval, Romain, Kevin Cheng, Kum Hwa Oh, Richa Saraf, and Dulani Seneviratne (2014). “Trade Integration and Business Cycle Synchronization: A Reappraisal with Focus on Asia.” IMF Working Paper, 14/52.Google Scholar

  • Eichengreen, Barry (2007). “The Real Exchange Rate and Economic Growth.” Commission on Growth and Development Working Paper 4, World Bank.Google Scholar

  • Eichengreen, Barry and Poonam Gupta (2013). “The Real Exchange Rate and Export Growth: Are Services Different?” Policy Research Working Paper Series 6629, The World Bank.Google Scholar

  • Eichengreen, Barry and Hui Tong (2015). “Effects of Renminbi Appreciation on Foreign Firms: The Role of Processing Exports.” Journal of Development Economics 116 (2015): 146–157.Google Scholar

  • Financial Times (2015). “Rich Economies Question Faith in Power of Lower Exchange Rates”, Global Insight, published on March, 9th 2015.

  • Freund, Caroline and Martha Denise Pierola (2012). “Export Surges: The Power of a Competitive Currency.” Journal of Development Economics 97 (2): 387–395.CrossrefGoogle Scholar

  • Hausmann, Ricardo, Lant Pritchett and Dani Rodrik (2005). “Growth Accelerations.” Journal of Economic Growth 10: 303–329.CrossrefGoogle Scholar

  • International Monetary Fund (2013). “Trade Interconnectedness: the World with Global Value Chains.” IMF Policy Paper (Washington: International Monetary Fund).Google Scholar

  • International Monetary Fund (2015a). “Exchange Rates and Trade Flows: Disconnected?” World Economic Outlook, Chapter 3 (Washington: International Monetary Fund).Google Scholar

  • International Monetary Fund (2015b). “Reaping the Benefits from Global Value Chains.” Regional Economic Outlook: Asia and Pacific, Chapter 2 (Washington: International Monetary Fund).Google Scholar

  • Johnson, Robert C. (2014). “Five Facts about Value-Added Exports and Implications for Macroeconomics and Trade Research.” Journal of Economic Perspectives 28 (2): 119–142.CrossrefWeb of ScienceGoogle Scholar

  • Koopman, Robert, William Powers, Zhi Wang, Shang-Jin Wei (2010). “Give Credit Where Credit Is Due: Tracing Value Added in Global Production Chains.” NBER Working Paper No. 16426.Google Scholar

  • Koopman, Robert, Zhi Wang, and Shang-Jin Wei (2014). “Tracing Value-Added and Double Counting in Gross Exports.” American Economic Review 104 (2): 459–494.Web of ScienceCrossrefGoogle Scholar

  • Ligthart, Jenny and Sebastian Werner (2012). “Has the Euro Affected the Choice of Invoicing Currency?” Journal of International Money and Finance 31 (6): 1551–1573.CrossrefGoogle Scholar

  • Mattoo, Aaditya, Prachi Mishra and Arvind Subramanian (2014). “Spillover Effects of Exchange Rates: A Study of the Renminbi”, mimeo, World Bank.

  • Nicita, Alessandro (2012). “Exchange Rates, International Trade and Trade Policies.” UNCTAD Blue Series on Policy Issues on International Trade and Commodities, forthcoming.Google Scholar

  • Patel, Nikhil, Zhi Wang, and Shang-Jin Wei (2014). “Global Value Chains and Effective Exchange Rates at the Country-Sector Level.” NBER Working Paper No. 20236.Google Scholar

  • Ree, Jack, Gee Hee Hong, and Seoeun Choi (2015). “Should Korea Worry about a Permanently Weak Yen?” IMF Working Paper No. 15/158.Google Scholar

  • Rodrik, Dani (2008). “The Real Exchange Rate and Economic Growth.” In Brookings Papers on Economic Activity, Fall 2008, edited by D. W. Elmendorf, N. G. Mankiw, and L. H. Summers, 365–412, Washington DC, USA: Brookings Institution.Google Scholar

About the article

Published Online: 2016-06-22


Citation Information: The B.E. Journal of Macroeconomics, Volume 17, Issue 1, 20150130, ISSN (Online) 1935-1690, ISSN (Print) 2194-6116, DOI: https://doi.org/10.1515/bejm-2015-0130.

Export Citation

©2017 Walter de Gruyter GmbH, Berlin/Boston.Get Permission

Citing Articles

Here you can find all Crossref-listed publications in which this article is cited. If you would like to receive automatic email messages as soon as this article is cited in other publications, simply activate the “Citation Alert” on the top of this page.

[1]
Dario Fauceglia, Andrea Lassmann, Anirudh Shingal, and Martin Wermelinger
Review of World Economics, 2018
[2]
Koen De Backer, Philippe De Lombaerde, and Lelio Iapadre
International Economics, 2018
[3]
Daniel Leigh, Weicheng Lian, Marcos Poplawski-Ribeiro, Rachel Szymanski, Viktor Tsyrennikov, and Hong Yang
IMF Working Papers, 2017, Volume 17, Number 58, Page 1

Comments (0)

Please log in or register to comment.
Log in