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IESE Research Papers,
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No D/470: Exchange rate crises and bilateral trade flows in Latin America

Jose M. Campa ()
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Jose M. Campa: IESE Business School, Postal: IESE Business School. Research Division, Av Pearson 21, 08034 Barcelona, SPAIN

Abstract: This paper looks at the behavior of trade flows in eight countries in Latin America that experienced an extreme nominal exchange rate depreciation. The composition of trade flows shows a very persistent pattern around these episodes of large exchange rate movements. Both the industry composition of trade and the country composition of trading partners remain stable after the devaluation occurs. The relative importance of export and import industries in the countries' trade flows does not vary substantially, nor does the importance of the different source countries for imports and destination countries for exports. Exports to industrialized countries are especially sensitive to changes in the real exchange rate, while bilateral import flows do not show much reaction to changes in bilateral exchange rates.

Keywords: Trade flows; bilateral trade; exchange rate; devaluation

JEL-codes: G00; M10

33 pages, September 29, 2002

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