Money Talks, What’s The Story?

The purpose of this research is to analyze the relationship between a country’s currency and their total imports and exports. Theoretically, a currency’s flotation in value will influence the net imports or exports for the related nation. A currency that is appreciating in relation to others will cause more foreign purchases, and therefore, an increase in imports and a relative decrease in exports. To analyze this, the currency exchange rate data and international trade data for the corresponding twenty-one nations, for the past seventeen years, was mathematically and graphically examined. When analyzed, the correlation coefficients for the net exports and exchange rates extended from -.896 to +.945. This wide range would generally reflect a weak or non-extant relationship, however, some correlations appeared to be tarnished by different external environmental factors. With further analysis, deviations from a positive correlation could be partially justified. Based upon this research, no definitive conclusion can be made on the validity of the exchange rate and net export relationship.