Examining the Relationship Between Exchange Rate Fluctuations and Export Competitiveness in Developing Economies

Abstract

Exchange rate fluctuations are a key determinant of export competitiveness, particularly in developing economies. This paper examines the relationship between exchange rate movements and the export performance of developing economies, with a focus on how exchange rate volatility can affect the price competitiveness of exports. Through empirical analysis and case studies, the paper highlights how exchange rate devaluation or appreciation impacts the cost structure of exporting firms and their ability to compete in international markets. The study explores the dynamic nature of this relationship, considering both short-term and long-term effects. Additionally, the paper assesses the role of government policies, such as exchange rate stabilization and hedging strategies, in mitigating the negative impact of exchange rate volatility on export competitiveness. The findings underscore the importance of a stable exchange rate for developing economies aiming to enhance their export sector’s competitiveness, attract foreign exchange, and achieve sustainable economic growth.