Economic theory suggests that a country's trade balance should increase following a depreciation of its currency, due to the effect on the relative price of its exports and imports. This article examines the reaction of the UK trade balance since the substantial depreciation of sterling between Q3 2007 and Q1 2009, and explores the reasons why trends in UK trade may not have developed as would be expected given the sustained depreciation of sterling.
Source agency: Office for National Statistics
Designation: Supporting material
Alternative title: Explanations beyond exchange rates