Exchange Rate Dynamics and Trade Asymmetry: A Multi-Method Analysis of Structural Heterogeneity

Chenyu Xie

Co-Presenters: Individual Presentation

College: College of Business and Public Management

Major: BS.ECONOMICS

Faculty Research Mentor: Chen Meng

Abstract:

This paper examines how exchange rate fluctuations affect export performance across 112 countries between 2000 and 2024 , using data from the World Development Indicators (WDI). While aggregate analyses often yield insignificant results, we argue that structural heterogeneity across economies masks meaningful relationships. Using a multi-method approach that combines panel regressions, K-means clustering, and interaction models, we identify three distinct country regimes. Highly integrated manufacturers and volatile resource exporters exhibit muted responses, while stable manufacturing economies demonstrate strong sensitivity—a unit depreciation raises exports by approximately 2 percentage points of GDP. Interaction models confirm this heterogeneity is robust. These results highlight the importance of considering structural differences in policy design and suggest that optimal exchange rate strategies should be tailored to a country's economic structure.