Abstract
ABSTRACT Direct and indirect effects of exchange rates on foreign and home prices may induce a change in terms of trade and volume of trade. In particular, the price effect in substitutability between foreign and home products and endogeneity of the foreign price provide evidence for the indirect impact of the exchange rate on home price. Furthermore, elasticity of substitution and degree of returns to scale influence the impact of the exchange rate on terms of trade and trade volume. In an empirical examination of the Korean beef market, this study found a decrease in terms of trade and an increase in volume of trade when the U.S. dollar depreciates, and an increase in terms of trade and a decrease in volume of trade when the U.S. dollar appreciates. However, the effect on terms of trade is greater than the effect on volume, implying that the foreign price elasticity of import demand is less than one. Key words: exchange rate, home and foreign prices, direct and indirect effects, terms of trade, volume of trade. The study of the exchange rate in international commodity trade has been developed on the theoretical base of the Marshall-Lerner (LM) condition and
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
