Are exchange rates less important for trade in a more globalized world? Evidence for the new EU members
Boris Fisera and
Economic Systems, 2022, vol. 46, issue 1
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.
Keywords: Balance of trade; Exchange rates; Currency misalignments; Global value chains; Panel; Cointegration (search for similar items in EconPapers)
JEL-codes: F31 F32 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Are Exchange Rates Less Important for Trade in a More Globalized World? Evidence for the New EU Members (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:46:y:2022:i:1:s0939362521000169
Access Statistics for this article
Economic Systems is currently edited by R. Frensch
More articles in Economic Systems from Elsevier Contact information at EDIRC.
Bibliographic data for series maintained by Catherine Liu ().