If currencies were perfectly elastic then yes, the price of the exports would increase exactly to match the inflation. But they're not, if a currency falls it takes years for that change to be reflected in the prices. For example the Canadian dollar has been hovering near par for years and is now 5% higher but the prices of US imports are still higher than they should be.
Comments
If currencies were perfectly elastic then yes, the price of the exports would increase exactly to match the inflation. But they're not, if a currency falls it takes years for that change to be reflected in the prices. For example the Canadian dollar has been hovering near par for years and is now 5% higher but the prices of US imports are still higher than they should be.