[2012-4] Substitution and Income Effects of a Rise in the Exchange Rate on Consumption and Investment

등록일
2012.05.10
조회수
1997
키워드
Payment Markets Institutions Financiall Supervision System
담당부서
International Department(International Finance Research Team(+82-2-759-5970, 5962, 5745))

 A rise in a country’s exchange rate enhances price competitiveness of its products, leading to an increase in its exports and a decrease in its imports, consequently often improving its GDP. For this reason, a rise in a country’s exchange rate has been traditionally seen to be positive for the nation’s economy. However, research findings indicate that a rising exchange rate may cause a decline in real purchasing power and an increase in corporate costs, which dampens a country’s consumption and investment.

 

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