Tuesday, 1 May 2012

A quick look at the relationship between currency devaluations and export performance for Greece

Just a really quick post today. A lot of commentators are proposing that currency devaluation is the solution to the acute competitiveness problem that Greece is facing.  

In the chart I've plotted cumulative export performance for goods and services along with the cumulative change in the level of the exchange rate.

Exports could be boosted by devaluing one’s currency but then again they may not. It really is as ambiguous as that.  Currency devaluations do not change an economy’s fundamentals. For that to happen there are other prerequisites. There are so many different factors affecting a country’s export performance, I couldn’t even dream of writing them down. I’m not going to say anything further I think the chart is telling. Enjoy the 1st of May all of you. 

source: AMECO, own calculations

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