Publication detail

Are Exchange Rates Less Important for Trade in a More Globalized World? Evidence for the New EU Members

Author(s): Ing. Boris Fišera ,
prof. Roman Horváth Ph.D.,
Type: IES Working Papers
Year: 2020
Number: 10
ISSN / ISBN:
Published in: IES Working Papers 10/2020
Publishing place: Prague
Keywords: Balance of trade, exchange rates, global value chains, export sophistication, panel cointegration
JEL codes: F31, F32
Suggested Citation: Fisera B. and Horvath R. (2020): "Are Exchange Rates Less Important for Trade in a More Globalized World? Evidence for the New EU Members" IES Working Papers 10/2020. IES FSV. Charles University
Abstract: We evaluate the effect of exchange rate misalignments on the balance of trade and the role that global value chain participation plays in this effect for 11 new European Union member states. Using heterogeneous panel cointegration methods, we first estimate the real equilibrium exchange rate and detect episodes of currency misalignment. We find asymmetric effects of real currency misalignments: overvaluation has a negative effect, but undervaluation has no effect on the trade balance. Additionally, we find that global value chain participation weakens the effect of currency misalignments on the balance of trade. Therefore, our results suggest that
globalization reduces the role of exchange rates in stimulating the domestic economy.
Downloadable: wp_2020_10_fisera_horvath
July 2020
MonTueWedThuFriSatSun
  12345
6789101112
13141516171819
20212223242526
2728293031  

Partners

Deloitte

Sponsors

CRIF
McKinsey
Patria Finance