Exchange Rate Movements and Their Impact on International Trade
Pokharel, Ashish (2025)
2025
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2025123139031
https://urn.fi/URN:NBN:fi:amk-2025123139031
Tiivistelmä
Exchange rate movements play an important role for economies and businesses that are engaged in international trade. Exchange rate shifts are commonly acknowledged as the principal causes of trade changes, and the pricing tactics, as well as the whole decision-making process, are determined by the combination of risk and opportunity. This dissertation is a qualitative case study that focuses on the impacts of USD/EUR exchange rate volatility on the trade of the European Union with the United States from 2010 to 2024.
To obtain results, the researcher relies on the analysis and interpretation of secondary data from easily accessible sources such as International Trade Statistics, policy reports, publications from central banks, and reports from individual companies rather than collecting primary data himself. The theories behind exchange rates, such as Purchasing Power Parity (PPP), Interest Rate Parity (IRP), Balance of Payments, and the Market Microstructure Approach, are the ones that provide guidance throughout the analysis. A thematic analysis is the method chosen to disentangle the main patterns of the exchange rate volatility factor.
It turns out that the USD/EUR exchange rate swings have somewhat of a huge impact on, or better yet, they are the factor that has primarily affected the European export performance to the U.S. market in terms of pricing, stability of revenue, and competitiveness. This research shows that it is very important for businesses and policymakers to have good and effective exchange rate risk management because the latter is very much needed in the making of trade policies. The findings provide an even more refined insight into the connection between exchange rate fluctuations and international trade based on a real business situation.
To obtain results, the researcher relies on the analysis and interpretation of secondary data from easily accessible sources such as International Trade Statistics, policy reports, publications from central banks, and reports from individual companies rather than collecting primary data himself. The theories behind exchange rates, such as Purchasing Power Parity (PPP), Interest Rate Parity (IRP), Balance of Payments, and the Market Microstructure Approach, are the ones that provide guidance throughout the analysis. A thematic analysis is the method chosen to disentangle the main patterns of the exchange rate volatility factor.
It turns out that the USD/EUR exchange rate swings have somewhat of a huge impact on, or better yet, they are the factor that has primarily affected the European export performance to the U.S. market in terms of pricing, stability of revenue, and competitiveness. This research shows that it is very important for businesses and policymakers to have good and effective exchange rate risk management because the latter is very much needed in the making of trade policies. The findings provide an even more refined insight into the connection between exchange rate fluctuations and international trade based on a real business situation.