10-17-2005, 05:35 PM
the low exchange rate gives Japansese an edge over the other producers of the same product. china has also been using this trick for quite some time.
the exchange rate of a country has no <b>"DIRECT"</b> relationship with the GDP level. however an exchange rate that is low and consistent can boost the country's exports.
the drawback is that a low exchange rate will increase the cost of imports and if the demand for imports is inelastic the inflation level will rise. Paksitan is a case in point where Petroleum and Machinery are inelastic imports and make the major portion of the imports. the consistently falling rupee value is fuelling the inflation which ultimately has bad impacts on the economy.
Thank you very much indeed for asking this interesting question.
Regards,
Ice Blue
the exchange rate of a country has no <b>"DIRECT"</b> relationship with the GDP level. however an exchange rate that is low and consistent can boost the country's exports.
the drawback is that a low exchange rate will increase the cost of imports and if the demand for imports is inelastic the inflation level will rise. Paksitan is a case in point where Petroleum and Machinery are inelastic imports and make the major portion of the imports. the consistently falling rupee value is fuelling the inflation which ultimately has bad impacts on the economy.
Thank you very much indeed for asking this interesting question.
Regards,
Ice Blue
