The Real Exchange Rate and Export Growth: Are Services Different?

Abstract

We consider the determinants of exports of modern and traditional services. We consider the growth of export volumes and also periods of rapid sustained export growth. We ask whether the determinants of export growth rates and surges differ between merchandise, traditional services and modern services and whether developing countries are different. We find that the effect of the real exchange rate is even stronger for exports of services than exports of goods; it is especially strong for exports of modern services. Our results suggest that as developing countries shift from exporting commodities and merchandise to exporting traditional and modern services in the course of their development, appropriate policies toward the real exchange rate become even more important.

Keywords: Real Exchange Rate, Exports, Services, Traditional Services, Modern Services

JEL Classification: F15, F43