Theoretical connections between currency movements and trade volumes show minimal impact, suggesting challenges for economic policy.
This paper explains why currency movements and trade volumes, while theoretically related, have minimal effect on each other, in practice. In addition, it argues that volatile currency movements and trade deficits are not beneficial in the long run. A separate set of measures on how to deal with each issue is also discussed.
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William Padolina (2000) studied this question.
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