Foreign Trade and Macroeconomic Effects of Exports

  • Tamara TODOROVA American University in Bulgaria, Bulgaria

Abstract

We find that the IS-LM model and the national income model reinforce each other in the context of exports and the export multiplier. Using simple differentiation techniques, we derive several relationships with respect to foreign trade. As predicted by Keynes, exports have a favorable effect on national income and the interest rate. Exports also increase the average price level and the exchange rate in the country. Through the mechanism of the export multiplier exports increase imports, savings, and consumption. A higher propensity to import reduces national income and fosters a negative trade balance. Similar is the effect of a higher exchange rate which discourages exports and encourages imports.

References

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Published
2022-06-30
How to Cite
TODOROVA, Tamara. Foreign Trade and Macroeconomic Effects of Exports. Theoretical and Practical Research in the Economic Fields, [S.l.], v. 13, n. 1, p. 31 - 43, june 2022. ISSN 2068-7710. Available at: <https://journals.aserspublishing.eu/tpref/article/view/7082>. Date accessed: 14 aug. 2022.