I am starting research on the topic of the effects of exchange rate fluctuation on international trade, Can I get a overview on how do I proceed and what all can I analyse for my research
Exchange rate fluctuations can have a significant impact on international trade. When a country’s currency appreciates, its exports become more expensive and its imports become cheaper. This can lead to a decrease in exports and an increase in imports. Conversely, when a country’s currency depreciates, its exports become cheaper and its imports become more expensive. This can lead to an increase in exports and a decrease in imports.
Exchange rate fluctuation is the change in the value of one currency relative to another over time. Exchange rate fluctuation can affect international trade in various ways, such as:
- It can affect the competitiveness of exports and imports.
- It can affect the profitability and risk of international trade.
- It can affect the terms of trade and the balance of trade.
Well Akhil Patel , it actually depends on the fluctuation that we are talking about. If the rates are too volatile, it can make the markets more unideal or unattractive to investors considering that there are possible risks or uncertainties associated to those fluctuations. In my point of view, I think we need to know the underlying factors and externalities that cause these uneasy movements. If most investors will behave the same in a perception that the markets are unideal, a significant movement and even a crash could happen if they will sell their positions. Fluctuations are caused by the uncertain movements of elements in a chaotic system (in this case the economy). I can argue that in this situation, the bigger the economy is, the larger the implication to global trade but it is highly important to understand the underlying conditions and realities.
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