Exchange Rate Changes And Trade Structure Of Export Commodities

The exchange rate is a prerequisite for international trade, but also a bridgeconnecting the world economics. After the collapse of the Bretton Woods system, themajority of the countries have transformed the dollar-pegged exchange rate regimeinto the middle or a more flexible exchange rate regimes. As a result, the volatility ofthe exchange rate are strengthened, and the foreign exchange risk issues in import andexport trade are also highlighted. Considering the neutral of the exchange rates’ pricetransmission and the profit-driven of international direct investment, the variation ofthe exchange rate ultimately changes the output level among various exportmanufacturers in different industries, which leaves an impact on each country’s exportcommodity structure.BRIC countries (BRICS) which includes Brazil, Russia, India, China and SouthAfrica, all belonging to emerging market, have played an important role ininternational economics and trade and driven the world economic growth after thefinancial crisis to a certain extent. However, it’s a very small proportion for BRICcountries to settle the foreign trade using their domestic currency, hence the volatilityof the exchange rates brings great risk for the import and export trade. Meanwhile, theBRIC countries mostly rely on their natural resources and labor resources to developexport-oriented economy, which lead them to face the dilemma of “poor growth”.This paper discusses the impact of exchange rate movements on the BRICcountries’ export structure using the quantification analysis method based on the paneldata from1994to2013of the BRIC countries. The results suggest that there is asignificant difference which is made by the changes of the real effective exchange rateof the BRIC countries among the export commodity structures. Brazil, Russia andSouth Africa currency appreciation will help optimize their export commoditystructure. In contrast, the devaluation of India and China currency will help tooptimize the export structure. BRIC countries should to achieve a high class ofcompetitive advantage and gradually develop a competitive advantage based onnational circumstances, in order to avoid falling into “comparative advantage trap”.