Impact Of Currency Fluctuations On Foreign Trade

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Impact of Currency Fluctuations on Foreign Trade in Emerging Economies An Empirical Analysis Executive Summary The paper analyses the impact of currency fluctuations on foreign trade i.e. imports and exports of emerging economies. For our study we have analyzed emerging economies: Brazil, India, China and South Africa. The available literature shows that currency appreciation has negative impact on the trade of any economy. China’s exchange rate is being controlled by government authorities and is kept low as compared to its trade partners for the purpose of encouraging exports. We have analyzed data for last 13 years, from 2000 to 2013.The paper covers theoretical aspects of exchange rate fluctuations and trade. Our study the theoretical evidences and is consistent with past available researches. Introduction Exchange rate volatility refers to the tendency for foreign currencies to appreciate or depreciate in value, thus affecting the profitability of foreign exchange trades. The volatility is the measurement of the amount that these rates change and the frequency of those changes. There are many circumstances when exchange rate volatility comes into play, including business dealings between parties in two different countries and international investments. The underlying principle is exchange rate increases transaction costs and reduces overall gain. The increasing volatility of exchange rates after the fall of the Bretton Woods agreements has been a constant source of
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