2.1.1. The impact of exchange rate movements on export activities
Effects of exchange rate movements on exports:
As the exchange rate fell, the currency rises, the amount of foreign currency earned
from exports will drop, revenues from export activities calculated
shrinking domestic currency, exports are discouraged or common trend
common a decline in export activity.
In addition, when the exchange rate The exchange increased, the currency dropped it a
bright future opening up for the exporters, because the amount of foreign currency on
the foreign exchange to be much worse, stimulate
export growth and development provided that the input costs of
manufacturing exports has not increased accordingly.
* Effect of exchange rate fluctuations on the structure of exports:
For the structure of exports, including agricultural products, Rudimentary institutions
seem more sensitive to every fluctuation, reducing the exchange rate
compared to goods such as machinery, fuel ... The reason given
to explain this problem that is the elasticity of agricultural commodities,
crude processing for export price or exchange rate applied is very high, since it
is these items can be replaced while the elasticity of commodity machines
, equipment, the irreplaceable items as gasoline, oil ... is
very low. The exchange rate reduced the prices of export goods are relatively expensive and
prone to substitute items that the first category is removed from the list used
by foreign consumers and these items will also take gradually in the
structure of exports. Conversely, if the exchange rate increases, commodity structure
of export is likely to become richer due to price competition, increases in
export revenue that the diversification of export items ...
* Photo Effect of exchange rate fluctuations on the competitiveness of exports:
For the price competitiveness of exports, an increase of the rate of exchange
ruling will make exports competitive countries become more affordable due ,
whereas if the currency exchange rates increased immediately reduced price makes
exports become relatively expensive, competing on price decreases. In the same
market if the quality of consumer goods, the same general trend,
consumers will use the product cheaper. And suppose the cost of production in
the country provided the same coin is equal, the country has
reduced its currency exchange rate compared to the currencies of larger markets
, the competitiveness of prices the higher that country, that country has the opportunity to develop
more export.
- In a nutshell, the currency fell to benefit exports, local currency price increases
, which would otherwise be detrimental.
- The reduction, increased rates are falling, the nominal exchange rate, not the real exchange rate, so if a rise in the exchange rate which has caused lower nominal exchange rate real exchange rate of the domestic currency is still considered a valuation higher than the real value, the effect of promoting the export will not much.
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