Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries

Reinhart, Carmen (1995): Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries. Published in: IMF Staff Papers , Vol. 42, No. 2 (June 1995): pp. 290-312.

Abstract

Devaluation is an integral part of adjustment in many developing countries, particularly relied upon by countries facing large external imbalances. A devaluation can only reduce trade imbalances if it translates to a real devaluation and if trade flows respond to relative prices in a sig nificant and predictable manner. However, a recent strand in the empirical trade literature has questioned the existence of a stable relationship between trade flows and its traditional determinants. This paper re-examines the relationship between relative prices and imports and exports in a sample of 12 developing countries.

• Item Type: MPRA Paper
• Language: English
• Keywords: devaluation, imports, exports, trade elasticities
• Subjects: F - International Economics > F3 - International Finance > F32 - Current Account Adjustment; Short-Term Capital Movements; F - International Economics > F1 - Trade