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Real Exchange Rates and Trade Protectionism

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  • Oatley Thomas

    (University of North Carolina)

Abstract
Real exchange rate movements are robustly related to the rise and fall of trade protectionism. I demonstrate this by presenting a theoretical model that incorporates the real exchange rate into a standard factor proportions model of trade policy preferences. The model demonstrates why some firms' trade policy preferences, and thus total demands for protectionism, change in response to real exchange rate movements. I evaluate the model with data on antidumping investigations in six industrialized countries between the late 1970s and 2004. The exercise suggests that the real exchange rate hypothesis offers a more compelling explanation for protectionist waves than the business cycle hypothesis.

Suggested Citation

  • Oatley Thomas, 2010. "Real Exchange Rates and Trade Protectionism," Business and Politics, De Gruyter, vol. 12(2), pages 1-19, August.
    • Handle: RePEc:bpj:buspol:v:12:y:2010:i:2:n:1
    DOI: 10.2202/1469-3569.1309
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    References listed on IDEAS

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    Cited by:

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    3. Peter Nuhu & Dramani Bukari, 2021. "An analysis of export, import and exchange rate oscillation in Ghana," International Journal of Economic Policy Studies, Springer, vol. 15(2), pages 301-327, September.
    4. Auray, Stéphane & Devereux, Michael B. & Eyquem, Aurélien, 2022. "Self-enforcing trade policy and exchange rate adjustment," Journal of International Economics, Elsevier, vol. 134(C).
    5. Stéphane Auray & Michael B. Devereux & Aurélien Eyquem, 2024. "The Demand for Trade Protection over the Business Cycle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 56(4), pages 865-898, June.
    6. Georgios Georgiadis & Johannes Gräb, 2016. "Growth, Real Exchange Rates and Trade Protectionism since the Financial Crisis," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 1050-1080, November.
    7. Alessandro Nicita, 2013. "Exchange rates, international trade and trade policies," International Economics, CEPII research center, issue 135-136, pages 47-61.
    8. J. Bradford Jensen & Dennis P. Quinn & Stephen Weymouth, 2014. "The Influences Of Foreign Direct Investments, Intrafirm Trading, And Currency Undervaluation On U.S. Firm Trade Disputes," Working Papers 14-04, Center for Economic Studies, U.S. Census Bureau.

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