Exchange rate variations and export competitiveness in less developed countries under generalized floating

This paper identifies two basic sources of effective exhange rate (EER) changes under the present system of generalized currency floating and formulates some EER‐based measures of relative export competitiveness in developing countries. These measures are presented and analyzed in terms of their monthly movements and trends over the period from March 1973 to December 1979 for twenty‐three developing countries. Export profitability vis‐à‐vis import‐competing production is shown to have been affected by major currency realignments only to a moderate extent. Normal currency depreciation, both small and large, is found not to lead necessarily to a permanent improvement in export competitiveness. The relationship between the type of exchange rate management and ability of the national authorities to adopt monetary and fiscal policies supportive of real exchange rate adjustment is also empirically examined.