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Exchange rates, international trade and inflation: a developing economy perspective

Aziz, MD. Nusrate (2011)
Ph.D. thesis, University of Birmingham.

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Abstract

The thesis focuses on empirical modelling and estimation of the role of exchange rate in international trade adjustment, trade prices and domestic inflation in the context of developing countries. Although the study‘s prime focus is to estimate empirically, using Bangladesh as the main case study, the theoretical assumptions about the effectiveness of exchange rates polices towards trade prices, domestic inflation and trade performance, we also examine the asymmetric behaviour of ‗large exchange rate shocks‘ in trade flows of other South Asian countries such as India, Pakistan and Sri Lanka. Estimated results demonstrate that the exchange rate has a significant positive impact on trade balance in the short- and long-run. However, the J-curve phenomenon can be explained as an appropriate response of trade balance to exchange rate shocks. Along with relative prices and domestic real income, the export demand is also found to be the significant determinant of import demand function. We find ‗complete‘ exchange rate pass-through to import price in both the short- and long-run. However, the ‗second stage pass-through‘ to consumer prices is found to be only ‗partial‘ in both the short- and long-run. Trade liberalization is a significant phenomenon for Bangladesh‘s trade and inflation. Hysteresis in international trade is found to be a ‗commodity and country specific‘ phenomenon. Sunk costs are not found to be significant for hysteresis.

Type of Work:Ph.D. thesis.
Supervisor(s):Banerjee, Anindya and Horsewood, N. (Nick)
School/Faculty:Colleges (2008 onwards) > College of Social Sciences
Department:Birmingham Business School
Subjects:HC Economic History and Conditions
HB Economic Theory
Institution:University of Birmingham
ID Code:1745
This unpublished thesis/dissertation is copyright of the author and/or third parties. The intellectual property rights of the author or third parties in respect of this work are as defined by The Copyright Designs and Patents Act 1988 or as modified by any successor legislation. Any use made of information contained in this thesis/dissertation must be in accordance with that legislation and must be properly acknowledged. Further distribution or reproduction in any format is prohibited without the permission of the copyright holder.
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