Why is it that large movements in exchange rates have small effects on international prices? What does this mean for a crisis-stricken Eurozone? Using firm-level data, this column presents new research that investigates this exchange rate ‘disconnect’. Evidence suggests that the prices of the largest firms – with their disproportionately large share of trade – are insulated from exchange rate movements. The international competitiveness effects of a euro devaluation are therefore likely to be modest, given major exporters’ reliance on global supply chains.

Increasingly, services form a larger and larger share a country’s exports. Do exchange rates matter as much for services and they do for goods exports? This column argues that they do. Distinguishing between traditional services (such as trade and transport, tourism, financial services and insurance) and modern services (such as communications, computers, information services) suggests that the effect of the real exchange rate is especially large for exports of modern services.

How can Spanish firms innovate to overcome strong economic headwinds? This column presents empirical evidence to show that, in a time of economic crisis, Spanish firms would do well to orient themselves toward foreign markets. The authors propose that there could well be mutiple – and durable – benefits to both the firms and the Spanish economy.

Industrial development has long been considered crucial to economic growth and a higher standard of living. But what role do exports play in this story? This column confirms earlier findings that what products you export matters for growth – but shows that it also matters when you export them.

How do firms go international? This column reviews evidence from industrialised and emerging economies, including Japan and China, with some surprising findings.

How do firms adapt their products before starting to export? This column argues they upgrade their products’ quality. Using data from Mexico, it shows that producers tend to enjoy a price premium on the domestic market relative to other companies producing the same product. This premium appears exactly one year before the product is exported, suggesting producers are getting ready to export.

Recent theoretical and empirical trade research has shifted from analysing aggregate trade flows to studying the behaviour of exporters. This column examines the case of Jordan and finds that multi-product exporters in Jordan look remarkably similar to their US and French counterparts, confirming the predictions of recent theoretical models. It adds that this implies the policy focus should be on raising the number of exporters, not on helping the existing superstars.

Understanding China’s economy is becoming as difficult as it is important. This is particularly the case for China’s exports and its exchange rate, which have been the source of controversy and intense debate in recent years. Shedding light on the issue, this column disaggregates China’s processing trade, with some surprising implications for policy in the region and elsewhere.

The synchronised poor growth in European countries can be explained by many factors, including trade and financial linkages. This column argues that firms’ domestic sales are directly affected by the fall in their exports. Using French firm-level data and the Asian Crisis as a foreign-demand shock, it finds that domestic sales were 5% lower for firms exposed to the crisis. It suggests that this is because the cash flow generated by exports may be used by firms to finance domestic operations in the short term.

A large literature documents the benefits brought by foreign direct investment to recipient countries in terms of productivity and economic growth. This column argues that another effect is the boosting of the quality of exports. It shows that investment promotion leads to more inflows of FDI, which in turn allow developing countries to upgrade their export basket.