The Multidimensional Impact of Exchange Rate Fluctuations on International Trade Competitiveness within the Framework of Purchasing Power Parity Theory

Journal: Modern Economics & Management Forum DOI: 10.32629/memf.v6i3.4028

Weijia Li

The Pennsylvania State University, State College, Pennsylvania, USA

Abstract

Taking into account of the Purchasing Power Parity theory, this paper establishes an three-dimensions analytical framework to explore the influence of exchange rate fluctuation on international trade competitiveness with regard to three aspects: export price competitiveness, import substitution and industrial chain capital cost. The research results indicate that the exchange rate stability can significantly enhance the foreign trade performance of firms, advance industrial upgrading and strengthen the national competitive advantages. This research provides theoretical support and empirical reference for policy formulation.

Keywords

exchange rate fluctuations, purchasing power parity, international trade competitiveness, industrial structure adjustment

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References

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