REAL EXCHANGE RATE EURO-DOLLAR AND FOREIGN TRADE BALANCE: ANALYSIS OF SPAIN, GERMANY AND FRANCE IN COMPARISON WITH THE USA. 1960-2007

Abstract

One aim of this paper is to relate the evolution of real exchange rate Euro-Dollar to the foreign trade balance, with analysis three European countries: Spain, Germany and France, for the period 1960-2007. A second question is to analyse the effects of changes of REER on the evolution of Exports and Imports. A third point is to evaluate the impact of those changes on industrial and non industrial production and economic growth. We estimate an econometric model for the case of Spain that explains the causes and consequences of the huge increase of the trade deficit during the period 2004-2009 and we insist on the convenience to develop economic policies aimed to get higher levels of industrial production per inhabitant to increase Exports and to moderate foreign trade deficit.