Global Value Chains and Exchange Rates

From VoxEU.org (excerpt):

The age of global value chains

João Amador, Filippo di Mauro 09 September 2015

There is an urgent need for policymakers to fully acknowledge the extent to which conventional indicators related to gross trade are severely flawed as policy benchmarks because they fail to take into account the existence of global value chains and their increasing role in shaping the global economy. This column, which introduces a new Vox eBook, urges academics to start proposing workable indicators that are systematically produced and readily available.

Exchange Rates Are Relative Prices

I used this analogy  in a conversation last week, and its too apt not to publish it.

Imagine you’re in the stock market and trying to evaluate two different stocks. Now, fundamental based analysis would look at earnings, book value, gearing, corporate strategy and so on, and come up with a target price for the stocks which reflects what the price of a stock should be.