The impact of exchange-rate and trade policy on export performance in the 1980s

Moguillansky, Graciela

1995-04

LC/G.1858-P

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The region's changeover from a shortage of external funds to a relatively plentiful supply of such resources at a time when an effort is being made to liberalize its trade and financial sectors raises a number of questions regarding the effect of this phenomenon on the growth of Latin American exports. In an effort to answer these questions, the author examines a number of different attempts to arrive at a quantitative evaluation of the relationship between exchange and trade policies and the region's export performance in the 1980s. The main conclusions drawn from this analysis are that, in the aggregate, exports are not very sensitive to long-term variations in exchange rates, since only rarely are their elasticities greater than unity. When broken down by branch of activity, however, the effects of exchange policy are not homogeneous, with some branches exhibiting very high elasticities in both the long and short terms; this suggests that the greater the level of diversification and installed capacity, the greater the impact of variations in the real exchange rate will be. The studies examined here also lead to the conclusion that volatile real exchange rates and unstable trade policies discourage investment in the export sector, while it is found that the tariff reforms instituted by the countries have had a positive influence on the development of their exports but cease to be a decisive factor in that development once their implementation is completed.

Includes bibliography

TRADE POLICY; FOREIGN EXCHANGE RATES; EXPORTS; TIPOS DE CAMBIO; POLITICA COMERCIAL; EXPORTACIONES;