Abstract

This short paper raised issues on the effectiveness of exchange rate policy within the context of export promotion. Exchange rate was noted to be stable and properly aligned in the long-run implying an incentive deficit for the drive to boost export demand. With expectations defining export growth, strong doubts were cast on the existence of both the J-Curve phenomenon and the long-run trade balance driving capability of the exchange rate. The economics of the effect of currency depreciation/ devaluation appeared to support these assertions. However, a liberalized economy could systematically and continuously use exchange rate policy to boost export growth.

JEL Codes: A1, A2, E65; F41.

Keywords: General economics; Economic education and teaching of economics; Macroeconomics with monetary economics; Open economy macroeconomics