similarities
trade surplus country:
forex appreciation lowers import prices
lifting the relative general price level lowers import prices
trade deficit country :
forex devaluation raises import prices
lowering relative price level raises import prices
differences :
the general price level changes obviously effect non trade good prices
no substitution effect toward non trade goods
export pricing ???
the relative price level change effects impell export price changes for surplus traders
forex moves impell too both changes mean the export can buy less domestic inputs from foreign earnings
but more foreign imports for processing into exports
off shoring impetus
switching to off shore sources might allow no price change on exports
imagine if global trade goods prices are unique ???
not unique ????
the big problem is the irreducable historically given limited product flex
ie production structure granularity and the grain ain't fine
pebbular rocky maybe even boldicular at any rate
far far from coloidal
the lack of a infinitessimalizable production base with dough like reshape ability
makes the presumption of qualitatively different short and mid term outcomes
with the use of one or the other policy instrument look sound
to be continued
