Amiti, Mary, Itskhoki, Oleg, Konings, Josef.
Why is it that large movements in exchange rates have small effects on international prices? What does this mean for a crisis-stricken Eurozone? Using firm-level data, this column presents new research that investigates this exchange rate ‘disconnect’. Evidence suggests that the prices of the largest firms – with their disproportionately large share of trade – are insulated from exchange rate movements. The international competitiveness effects of a euro devaluation are therefore likely to be modest, given major exporters’ reliance on global supply chains.
Πηγή: Voxeu