2019/06/01 by Plamen Iossifov, Xuan Fei
Economics, Econometrics and Finance · #Global Financial Crisis and Policies #Global trade and economics #Monetary Policy and Economic Impact
paper · pdf · doi:10.5089/9781498312738.001
openalex publication_date 2019/06/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/30
There is an ongoing debate in the literature on whether global trade flows have become disconnected from the large real effective exchange rate movements in the wake of the global financial crisis. The question has important policy implications for the role of exchange rates in supporting growth and restoring external balance. In this paper, we use Turkey---a large and open emerging market economy that has experienced sizable swings of the real effective exchange rate---as a case study to test competing hypotheses. Our results lend support to the finding in existing cross-country studies that the real effective exchange rate remains an important determinant of trade flows. But, its effect is not symmetric in secular periods of appreciation and depreciation and is, oftentimes, dwarfed by the impact on trade flows of the income growth differential between trade partners.