Thanks for the question. I think everything you need is in these
articles below. Please let me know if you need me to clarify my
response.
DEVALUATION AND INTERNATIONAL POLITICAL ECONOMY:
Why Devaluation is the right way
John Muellbauer
The Independent
17 September 1992
http://www.housingoutlook.co.uk/Papers/ancient4.html
The Effects of Financial Crises on International Trade
www.nber.org/books/ease14/ma-cheng10-24-03.pdf
God's Diplomacy - International Trade and the Macedonian Economy
Sam Vaknin, Ph.D.
http://www.theallineed.com/ad-business-4/business-011.htm
Does Currency Devaluation Improve the Trade Balance in the Long Run?
Evidence from Malawi
http://www.blackwell-synergy.com/links/doi/10.1111/j.1467-8268.2003.00076.x/abs/
"This paper explores the impact of nominal exchange rate devaluation
on the trade balance for Malawi. A smallopen economy ISLM aggregate
supply model of Malawi estimated using time series data covering the
period 1967-96 is used in the simulation analysis. The results of the
simulation experiment show that devaluation helps to improve export
performance and to curtail the growth of imports in the long run,
which lead to improvement in the trade balance position. The results
provide evidence supporting the view that nominal devaluation can
indeed be a quite powerful tool in minimizing the imbalances in
Malawi's international trade."
Devaluation and Inflation (includes graphical analysis)
www.rba.gov.au/PublicationsAndResearch/ Bulletin/bu_may93/bu_0593_1.pdf
International Trade & Finance : Current Trends And Difficulties
http://www.legalserviceindia.com/articles/article+2302682b.htm
How Does a Devaluation Affects the Current Account?
Author(s): Devereux, M. B. Affiliation: Unlisted
Publication: University of British Columbia, UBC Departmental Archives
Year: 1999
Description: 22 pages
<<...exchange rate devaluation affects the current account in a sticky
price intertemporal optimizing model. The main issue we address is how
the features of international pricing impact on the response of the
current account. When prices are all set in producers currencies, a
devaluation improves the current account as long as the conventional
Marshall-Lerner elasticity condition is satisfied, which must be the
case in our model. This is fundamentally an atemporal condition. But
when prices are all set in consumer's currencies (pricing-to-market),
the effect of devaluation on the current account depends upon the size
of the intertemporal elasticity of substitution of consumption across
time periods. The current account may rise or fall in this case. When
pricing-to-market is partial, the effect of devaluation on the current
account depends on the strength of the atemporal elasticity relative
to the intertemporal elasticity.>>
THE FOREIGN EXCHANGE MARKET AND TRADE ELASTICITIES (includes graphs)
http://wps.aw.com/wps/media/objects/22/22708/ch16sg.pdf
Introduction to International Trade (requires dowloading the document)
www.macalester.edu/courses/econ221/c21f03h6s.doc
Explaining the Duration of Exchange-Rate Pegs
Author(s): Klein, Michael W. ; Marion, Nancy P. Affiliation: Unlisted; Unlisted
Publication: National Bureau of Economic Research, Inc, NBER Working Papers: 4651
Year: 1994
<<This paper is a theoretical and empirical investigation into the
duration of exchange-rate pegs. The theoretical model considers a
policy-maker who must trade off the economic costs of real
exchange-rate misalignment against the political cost of realignment.
The optimal time to spend on a peg is derived and factors that
influence peg duration are identified. The predictions of the model
are tested using logit analysis with a data set of exchange-rate pegs
for sixteen Latin American countries and Jamaica during the 1957-1991
period. We find that the real exchange rate is a significant
determinant of the likelihood of a devaluation. Structural variables,
such as the openness of the economy and its geographical trade
concentration, also significantly affect the likelihood of a
devaluation. Finally, political events that change the political cost
of realignment, such as regular and irregular executive transfers, are
empirically important determinants of the likelihood of a
devaluation.>>
Devaluation, Relative Prices, and International Trade: Evidence from
Developing Countries
Author(s): Reinhart, Carmen M Affiliation: Unlisted
Publication: International Monetary Fund, IMF Working Papers: 94/140
Year: 1994
FOREIGN TRADE AND THE BALANCE OF PAYMENTS
http://www.mecon.gov.ar/report/report29/trade.htm
Currency Crises: A Perspective on Recent Theoretical Developments
Author(s): Jeanne, Olivier Affiliation: Unlisted
Publication: C.E.P.R. Discussion Papers, CEPR Discussion Papers: 2170
Year: 1999
<<This paper puts recent theoretical developments in the literature on
currency crises in perspective by comparing two theoretical
approaches, one based on the speculative attack model of
Krugman-Flood-Garber and the other approach, which evolved following
the 1992-93 crisis of the European Monetary System, and that we call
here "escape clause". The escape clause approach broadens the set of
fundamentals to nonmonetary variables, including unemployment or the
state of the banking sector, and even "softer" fundamentals such as
the reputation of the policymaker and the rules of the game played by
the participants in a fixed exchange rate arrangement. It also
suggests that the relationship between the economic fundamentals and
devaluation expectations is in general nonlinear, and may give rise to
multiple equilibria. We argue that, while the speculative attack
approach provides useful insights on the anatomy of currency crises,
it must be complemented by the escape clause approach if one wants to
understand the underlying causes of the crises that we have witnessed
in the 1990s.>>
Does Currency Devaluation Improve the Trade Balance in the Long Run?
Evidence from Malawi
Source: African Development Review/Revue Africaine de Developpement
v15, n2-3 (December 2003): 339-52
Standard No: ISSN: 1017-6772
Reviewed Item: Publisher's URL
<<This paper explores the impact of nominal exchange rate devaluation
on the trade balance for Malawi. A small open economy IS-LM aggregate
supply model of Malawi estimated using time series data covering the
period 1967-96 is used in the simulation analysis. The results of the
simulation experiment show that devaluation helps to improve export
performance and to curtail the growth of imports in the long run,
which lead to improvement in the trade balance position. The results
provide evidence supporting the view that nominal devaluation can
indeed be a quite powerful tool in minimizing the imbalances in
Malawi's international trade.>>
The Devaluation Expectations in Hong Kong and Their Determinants
Source: Journal of the Japanese and International Economies v17, n2
(June 2003): 174-91
Standard No: ISSN: 0889-1583
Reviewed Item: Publisher's URL
<<This paper uses over-the-counter currency options on the Hong Kong
dollar to estimate the expected probability and intensity of a Hong
Kong dollar devaluation over a one-month horizon, from February 1997
to the end of 1998. It then addresses the issue of the determinants
driving these anticipations. It tests both for contagion effects
arising from the Asian crisis and for the significance of the double
speculative play involving the stock and Hang Seng index derivatives
markets. Fears of a substantial depreciation of the yen and the
Chinese renminbi along with portfolio reallocation effects and
cross-market speculative dynamics proved to have significantly
influence devaluation expectations in Hong Kong.>>
Bringing Down Barriers to Trade: The Experience of Trade Policy Reform
Source: Journal of African Finance and Economic Development v4, n1
(Summer 2001): 163-95
Standard No: ISSN: 1060-6076
<<The record of (rude policy reform in sub-Saharan Africa (SSA) masks
substantial variation among countries and a tendency in the region for
trade reforms to be stalled or reversed subsequent to implementation.
Despite a decade of intensive reform the trade environment in Africa
remains constrained. Measures of the impact of reforms on the trading
environment suggest that nominal protection remains high, many
currencies are overvalued while others are subject to
hyperinflation/rapid devaluation, and the procedures and regulations
surrounding trade remain slow, burdensome, and restrictive. In
addition, various complementary measures, which must accompany trade
reforms in order to ensure the realization of the beneficial economic
effects of liberalization, are lacking. They include physical,
infrastructure, human capital (especially in technical and managerial
areas), and public institutions that regulate markets, assist
transactions, and provide safety, quality, and other standards for
transactions.>>
Business Week
May 26, 2003
<<One of the drawbacks of conventional wisdom is the frequency with
which it is just plain wrong. Everybody ''knows'' that a falling
dollar will boost the economy by making exports cheaper and imports
pricier. The result is supposed to be more jobs and higher profits as
well as a quick revival of growth. So as the dollar sinks against the
euro and the yen, we all breathe a collective sigh of relief.
How quickly we forget. Economic theory and the experience of the 1980s
tell a different story: A falling dollar, at least for the first year
or two, is like a deflationary tax. It takes time for consumers and
businesses, both in the U.S. and abroad, to adjust their buying
behavior. Until then, money is simply sucked out the door in the form
of higher import prices, just as if oil prices had spiked and stayed
high. The result: A weaker dollar depresses real wages and profits in
the near term and makes a robust recovery even more unlikely anytime
soon.
Of course, that doesn't mean everyone is hurt by a falling dollar.
Companies with big overseas sales, such as McDonald's Corp., are happy
to trumpet the benefits of a weaker dollar. Such companies can
immediately translate their foreign earnings in euro or yen into a
plumper bottom line in dollars, even if those overseas profits are
never brought home. Other companies, facing direct competition from
overseas rivals, gain pricing power. And eventually, a year or two
down the line, the weaker dollar yields wider benefits, boosting
exports and cutting imports.
But for the immediate future, the effect of a declining currency will
be negative. Consumers will pay more for imported shoes, VCRs, cars,
and other goods, and have less money for other purchases. Similarly,
rising costs will hurt earnings at many businesses that rely on
imported raw materials and parts -- an increasingly large group in an
era of global supply chains. Retailers, especially, will find
themselves in a double bind since they'll have to pay higher prices to
stock their shelves with imported goods even as their customers are
increasingly cash-strapped.
Perhaps most distressingly, the weaker dollar could turn out to be a
drag on business investment. With the exception of autos and trucks,
imported capital goods account for about 40% of business spending on
new equipment. That means a drop in the dollar could push up prices
for capital goods, discouraging capital spending by companies. That
isn't the outcome we want if we are looking to continue the
productivity gains of the 1990s.
The experience of the last big devaluation, in the mid-1980s, doesn't
leave much room for optimism. The dollar peaked in the first quarter
of 1985 and then fell by almost 20%, on a trade-weighted basis, over
the next two years. More strikingly, the dollar fell 40% against the
yen over that period.
This sharp decline helped the profits and stock prices of a few large
exporters, such as Caterpillar Inc., while auto, steel, and tech
companies got a bit more relief from foreign competition. But the
economy as a whole suffered. The dollar value of goods imports soared
20% from the first quarter of 1985 to the first quarter of 1987, while
the dollar value of exports rose by only 4%. This is what economists
sometimes call the ''J-curve'' effect -- at, first, the trade balance
gets worse when the dollar declines and only improves later on.>>
Devaluation, Relative Prices, and International Trade: Evidence from
Developing Countries
http://ideas.repec.org/p/imf/imfwpa/94140.html
It's Still the Economy
http://itstheeconomy.blogspot.com/2003_05_18_itstheeconomy_archive.html
Do We Need To Be No. 1?
by David M. Gordon
The Atlantic
April 86
http://www.theatlantic.com/politics/foreign/gordon.htm
Related Links
International Trade Administration
http://www.ita.doc.gov/
US International Trade Commission
http://www.usitc.gov/
International Monetary Fund
http://imf.org
The World Bank
http://www.worldbank.org/
International Political Economy Network
http://csf.colorado.edu/ipe/
Google Search Terms
trade and devaluation
"international trade" devaluation
inflation and trade
additional databases used
Thanks again. I hope this helps.
Regards,
Anthony (adiloren-ga) |
