代寫termpaper：貨幣貶值改善貿(mào)易平衡
Currency Devaluation In Improving Trade Balance

貨幣貶值與貿(mào)易平衡的關(guān)系是經(jīng)濟學(xué)中一個有爭議的話題，在研究中出現(xiàn)了各種各樣的觀點。要又具有一個明確的答案是困難的，不可避免的偏見，除非有強有力的證據(jù)和良好的解釋支持。本文的重點是提供一個更廣泛的觀點的主題，而不進入復(fù)雜性和數(shù)學(xué)細(xì)節(jié)，它將專注于分析以上提出的主題為核心的觀點。

In theory, when a country's currency depreciates, foreigners find that its exports are cheaper and domestic residence find that imports are more expensive. (p470, Feenstra and Taylor 2008) i.e.: stronger (appreciation) Euro implies European can buy foreign goods more cheaply and foreigners find European goods more expensive and demand falls. When Euro depreciates (weaker), the opposite scenario occurs. Thus, an exports dependant country needs a weaker currency, because if it's too high, it will lose its competition. E.g.: Japan, a highly exports dependant country and its currency (Yen) has been increasing in value since 2007. They wanted to decrease Yen to keep its competition: by issuing more Yen (sell Yen to international market) to increase supply, so domestic price decrease and thus increase competition. Conversely, high imports countries should keep their currency strong.

The relation between currency devaluation and trade balance is a controversial topic in economics and variety opinions have arisen in the literature research. A definite answer is difficult itself and inevitably bias, unless supported by strong evidences and good explanations. The attention of this paper is to offer a broader view of the topic without going into complexity and mathematical details, and it will focus on the analysis presented above as the core-view towards the topic.

Section I describes the theoretical issues in explaining the effects of devaluation on trade balance. Section II describes some competing views of literature studies on devaluation and trade balance, and section III summarizes the results and draws some conclusions.

Theoretical Review 理論綜述

The assumption summarized in introduction is supported by the relevant literature that attempt to explain the relation between exchange rates and trade balance (TB). Theory such as expenditure switching (also called the absorption analysis) is in favor of devaluation help to improve trade balance: 'by switch expenditure from foreign to domestic goods, raise total production and decrease absorption relative to total production, so improving the trade balance' (Vamvoukas 2005). Assuming the prices of goods/services are fixed so that changes in the nominal exchange rate imply corresponding changes in the real exchange rate. In expenditure switching theory real exchange rate is the key, because it is the price of goods/service in a foreign country relative to the price of goods/ service in the home country. For instants, holding price level constant in both home (P) and foreign country (p*), if home country's exchange rate is 'E' then the real exchange rate'e' of the home country is e=EP*/P (p 715 Feenstra and Taylor 2008). For example, suppose good X cost a‚¬100 in the home country (Ireland), and the same good cost ￡90 in the UK, the exchange rate is ￡0.9852 per pound. Put the information in the equation e=EP*/P, we have (￡90x0.9852) [1] / a‚¬100=0.88668. This is the relative price of foreign goods in terms of home goods. It shows that good X is cheaper in the UK than in Ireland, because of the sterling's sharp depreciation (higher real exchange rate).

From home perspective, a rise in the real exchange rate (depreciation) indicates that foreign goods are become more expensive relative to home goods. As the real exchange rate rises, both home and foreign consumers will respond by expenditure switching: home country will imports less as home consumers switch to buying home goods. Thus, in the example above Irish consumer would switch to buy UK goods as UK goods get cheaper relative to Irish goods. This was indeed the case in the period of 2008-2009 where massive cross-border shopping from Ireland to the north due to the sterling depreciation. More recent example of such expenditure switching is the appreciation of Chinese RMB, people live in Shenzhen and other mainland cities are desired to spend in HK as the prices are now lower than previously (hktdc.com) [2] .

Above examples demonstrated that there is a strong correlation between real exchange rate and the trade balance (Figure 1), holding home and foreign prices fixed and the trade balance increases as real exchange rate increases: 'a，

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