Exchange rates and international trade

Priyaranjan Jha and Devashish Mitra

Chapter 11 in Elgar Encyclopedia of International Trade, 2026, pp 48-52 from Edward Elgar Publishing

Abstract: This entry examines the relationship between exchange rates and international trade, drawing on theory and empirical evidence. It explores exchange-rate pass-through, showing how pricing behavior, invoicing currency, and macroeconomic conditions shape the transmission of currency movements into prices. The analysis highlights the role of the US dollar as a dominant invoicing currency, the implications of firm heterogeneity and sunk costs for persistence and hysteresis, and the dampening effects of global value chains. It also reviews the Marshall–Lerner condition and J-curve dynamics, emphasizing how elasticities determine whether depreciations improve trade balances.

Keywords: Exchange-rate pass-through; Marshall; Lerner condition; Dominant currency paradigm; Firm heterogeneity; Global value chains (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035327492
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