Foreign trade and exchange stabilization

Many factors have served to dampen the recovery of foreign trade. In the opinion of many observers, price risks arising from the abandonment of the gold standard have been among the most powerful of these. The monthly prices of selected imports and exports for the years 1930, 1933, 1934 and 1935, adjusted for changes in foreign exchange rates (giving foreign price equivalents) do not bear out this contention. Price variability before the general departure from the gold standard was not smaller but, for many commodities, greater than in the succeeding years. In many instances, less price risk attached to dealings in the years 1934 and 1935 than in the pre-depression years. Nor can it be held that year to year changes in the physical volume of selected imports and exports are associated in any significant degree with changes in the variability of their foreign price equivalents. The correlation coefficients are low and of varying sign. Thus from the point of view of their purely mechanical effects upon foreign trade, price risks associated with dislocated exchanges cannot be accepted as primary obstacles to international trade recovery. Their psychological effects, however, may be more significant.