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Title: The Impact of Exchange Rate Fluctuations on European Union Trade

Author(s): André Sapir, Khalid Sekkat and Axel A Weber

Publication Date: November 1994

Keyword(s): EMS, Exchange Rates, Misalignments, Trade and Volatility

Programme Area(s): International Macroeconomics

Abstract: The impact of exchange rate fluctuations on international trade has long been a major concern for policy-makers. This is particularly the case in Europe, where countries trade extensively with each other. The crisis that began in the Summer of 1992 generated increased exchange rate fluctuations and, therefore, renewed concerns about consequences for trade inside the European Union. This report assesses the likely impact of the exchange rate crisis on trade flows inside and outside the Union. The analysis indicates the need to distinguish between short-term oscillations (i.e. volatility) and medium-term fluctuations (i.e. misalignment). We find that the recent ERM crisis is likely to have had some negative impact on trade within the region, but this impact is probably quite small.

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Bibliographic Reference

Sapir, A, Sekkat, K and Weber, A. 1994. 'The Impact of Exchange Rate Fluctuations on European Union Trade'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1041