Price Competitiveness in Export Trade Among Industrial Countries

Abstract

More than three years have passed since the revaluation of the German mark initiated a period of greater flexibility in exchange rates, and about one year since a new rate structure was agreed at the Smithsonian conference. Academic researchs and governement officials everywhere are scrutinizing current trade data for sign indicating the effectiveness of the realignment, particularly and solid start toward recersals in the deficit of the United States or the surpluses of Japan, Germany, and Canada. The magnitude of the prospective total effect had been assessed largely on the assumption, unconfirmed by empirical work, that the response of trade flows to changes in teh exchange rate would resemble that to changes in foreign trade prices in general; and the timing of the effect was almost pure guesswork.