Global Value Chains, Depreciations, and Exports

• In Event: Global Value Chains (GVCs) and Global Economic Orders

Abstract

What is the relationship between global value chains (GVCs) and the exchange rate elasticity of exports? While some studies show that increased GVC dependence reduces the exchange rate pass-through to firms engaged in GVC trade, thus reducing the price elasticity of trade (Amiti, Itskhoki, and Konings, 2014; Ahmed, Appendino, and Ruta, 2015), others find that GVCs have a negligible impact on the price elasticity of trade (Leigh, et al., 2017). In other words, the scholarship on exchange rates and trade in a world of GVCs is unsettled. In this paper, I replicate the aforementioned studies using a broader cross-section of countries and years to settle the debate on the relationship between GVCs and the exchange rate elasticity of exports over time. This paper contributes to the field of international political economy, in particular the work on exchange rate politics, by illustrating the changing dynamics of exchange rates and trade in a world of global production.

Author

• Ryan M. Weldzius, Villanova University