Differential Responses to Price and Exchange Rate Influences in the Foreign Trade of Selected Industrial Countries

Abstract

Determining how trade flows respond to price and exchange rate changes has posed a difficult problem in international economics. The lag with which currency depreciation or price inflation my affect imports and exports has important policy implications, but most work in this area has been somewhat conjectural. Some writers have argues that under a system of fixed exchange rates, trade flows responded differently ro changes in goods' prices then to exchange rate changes, but in the literature at date there is little empirical evidence on this proposition.