1. Pound Sterling depreciation and the UK's trade balance versus the USA's: Industry-level estimates.
- Author
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Gobbi, Lucio and Lucarelli, Stefano
- Subjects
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DEPRECIATION , *BALANCE of trade , *POUND sterling , *FOREIGN exchange rates , *SHORT selling (Securities) , *BUSINESS size - Abstract
• Between 2014 and 2017, the Pound depreciated against the Dollar due to monetary and institutional factors. • The effects of exchange-rate depreciation on the trade balance are heterogeneous among the UK's industries. • Following the currency depreciation, science-based industries tend to show a long-run negative effect. • The ARDL methodology is suitable for investigating the dynamics of exchange rates and the trade balance in the short and long runs. Between May 2014 and April 2017, the Pound Sterling depreciated substantially against the Dollar. The objectives of this paper are: 1) to investigate how that depreciation affected the main British industries; 2) to verify whether the trade asymmetries following the currency depreciation can be explained by considering the technological features of the industries as represented in the Pavitt Taxonomy. Using an ARDL methodology, our study analyses the effects of this depreciation for the UK with respect to the USA. We employ industry-level data at monthly frequency for the period 2010–2019. In detail, our estimation suggests that only in four industries out of thirty did the Trade Balance improve in the long run, while it worsened in eight. Moreover, our analysis shows that the Pound Sterling's depreciation against the Dollar had a long-run negative effect on the science-based UK industries. Finally, the size of industries does not seem to give clear indications as to long-term dynamics. [ABSTRACT FROM AUTHOR]
- Published
- 2022
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