Price competitiveness in export trade among industrial countries

Abstract

the revaluation of the German mark initiated a period of greater flexibility in exchange rates, and about one year since a new rate structure was agreed at the Smithsonian conference. Academic researchers and government officials everywhere are scrutinizing current trade data for signs indicating the effectiveness of the realignment, particularly any solid start toward reversals in the deficit of the United States or the surpluses of Japan, Germany, and Canada. The magnitude of the prospective total effect had been assessed largely on the assumption, unconfirmed by empirical work, that the response of trade flows to changes in the exchange rate would resemble that to changes in foreign trade prices in general; and the timing of the effect was almost pure guesswork.