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How Does a Depreciation in the Exchange Rate Affect Trade Over Time? Bachelor’s thesis within Economics Author: Anette Andersson Sofia Styf Tutor: Scott Hacker, Associate Professor Hyunjoo Kim, Ph.D. Candidate Jönköping January 2010 Bachelor’s Thesis in Economics Title: How Does a Depreciation in the Exchange Rate Affect Trade Over Time? Author: Anette Andersson, Sofia Styf Tutor: Scott Hacker, Hyunjoo Kim Date: 2010-01-19 Subject terms: J-curve phenomenon, exchange rate, depreciation, trade balance, trade ratio Abstract The purpose of this thesis is to examine how a depreciation in the exchange rate affects the trade balance in an economy over time. The outcomes of a depreciation are possible to analyze through the J-curve phenomenon that shows the relation between the exchange rate and the trade balance both in the short-run and the long-run. The data used in this thesis cover 39 countries and their quarterly changes in exchange rate between 1982 and 2005. Read More …

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