The role of exchange rates in network trade flows:

This chapter presents a theoretical model of how (real) exchange rate changes are likely to affect the operations of an MNC and the different types of trade flows. In formulating the model both the general phenomenon of product fragmentation and the specific conditions found in the spread of IPNs in Asia and the Pacific are taken into account. IPN operations in the region encompass a range of countries of widely differing by factor endowments and income and wage levels. Instrumental to these was the emergence of China as the assembly centre for the final manufactured exports that are mainly destined for North America and the European Union.

Related Subject(s): International Trade and Finance