1. Marshall-Lerner Conditional Elasticity Analysis is the most frequently cited method for the influence of exchange rate changes on the terms of trade, which examines whether the terms of trade have improved or deteriorated under the condition of exchange rate depreciation. The concept of elasticity is used because the devaluation of currency changes the prices of import and export commodities expressed in local currency or foreign currency at the same time, and the improvement of terms of trade depends on whether the increase (decrease) of local currency (foreign currency) of export commodities is greater than or less than that of import commodities. When a country's currency depreciates, the price of its export commodities can remain unchanged, and of course it can also rise. The depreciation of imported goods leads to the rise of local currency prices and the decline of demand. In order to maintain a certain market share, foreign exporters may lower the foreign currency prices of domestic imports. Use ηDX
, ηDM represents the price elasticity of import and export demand respectively, ηSX.
、ηSM
Respectively represent the price elasticity of import and export supply, and draw the following conclusions in the case of exchange rate depreciation:
When SX
ηSM
& gtηDX
ηDM
At that time, the depreciation of exchange rate worsened a country's terms of trade;
When SX
ηSM
=ηDX
ηDM
At that time, the depreciation of exchange rate had no effect on the terms of trade;
When SX
ηSM
& ltηDX
ηDM
At that time, the depreciation of exchange rate improved a country's terms of trade.
2. Long-term dynamic analysis of the impact of exchange rate changes on terms of trade.
In addition to the quantitative effect of exchange rate changes, due to the different price elasticity of import and export commodities, exchange rate changes will have different effects on the import and export volume of traded commodities, and the cost of factors such as labor wages will also change due to exchange rate changes, which will also change the comparative advantages of import and export commodities, and the results of comprehensive effects will have an impact on the structure of import and export commodities. Obviously, compared with the decisive factors such as different stages of economic development, differentiated domestic industries and foreign trade policies, this influencing factor can strengthen the effect of the adjustment of trade commodity structure to a certain extent, which may be beneficial to the adjustment and optimization of domestic trade commodity structure and industrial structure in the long run and to the promotion of trade and industrial competitiveness. Considering the unilateral terms of trade (S), its calculation formula is S.
=(Px
/
Prime minister
)Zx
，Px
Use Pm
commodity terms of trade
Productivity index representing the export sector. Because enterprises try to reduce costs and improve productivity in the environment of exchange rate changes, thus enhancing competitiveness, Zx
The value can be greatly improved, even if the terms of trade of goods decline, the terms of trade of unilateral factors can still rise.