An Analysis of the Influence of the Exchange Rate on the National Industrial Production

Abstract

The paper analyzes the theoretical approaches to the effect of the real exchange rate on domestic production. A mechanism is developed of decomposition of the overall result impact of the devaluation on the substitution effect and the income effect by the share of imports incountry demand. Verification of the method is provided, taking devaluation of the ruble in Russia in 1998 and 2008 as an example.