Exchange rate volatility plays a pivotal role in shaping the trade dynamics of emerging markets, where economies are often highly sensitive to currency fluctuations. Sudden or sustained variations in exchange rates can have profound implications on export competitiveness, pricing strategies, and the trade balance of these nations. While depreciation of domestic currency can theoretically boost exports by making them cheaper internationally, the actual impact is mediated by factors such as exchange rate pass-through, price elasticity of demand, and the structure of trade contracts. This paper critically examines the multifaceted relationship between exchange rate volatility and export performance in emerging economies, focusing on both short-term fluctuations and long-term trends. Drawing from empirical studies and case analyses across Latin America, Africa, and Southeast Asia, the study highlights how currency instability can discourage investment in export-oriented sectors, distort production planning, and increase hedging costs. Conversely, countries with flexible exchange rate regimes and diversified export portfolios often exhibit greater resilience. Further, the paper investigates how exchange rate shocks influence national trade balances, particularly in economies with significant import dependencies and external debt obligations. It explores how volatility affects trade volumes and trade values, thereby complicating monetary and fiscal policymaking. The study also discusses the role of macroeconomic fundamentals, institutional frameworks, and central bank interventions in managing currency risk. Recommendations are offered for policymakers on enhancing exchange rate stability, promoting hedging mechanisms, and diversifying exports to reduce vulnerability. Understanding this dynamic is crucial for emerging markets aiming to achieve sustainable trade growth and external sector stability amid global financial uncertainty.
@artical{c12112023ijcatr12111008,
Title = "Effect of Exchange Rate Volatility on Export Competitiveness and National Trade Balances in Emerging Markets ",
Journal ="International Journal of Computer Applications Technology and Research (IJCATR)",
Volume = "12",
Issue ="11",
Pages ="57 - 71",
Year = "2023",
Authors ="Chidimma Maria-Gorretti Umeaduma, Adriana Nanorki Dugbartey"}