BOE’s Tenreyro Says Exchange Rates Still Important for Exports


(Bloomberg) --

Foreign exchange rates still have important effects on export volumes despite the growth of invoicing in dollars, according to Bank of England policy maker Silvana Tenreyro.

In a speech about three open questions in economics that did not discuss her current monetary policy views, Tenreyro said that even in countries where dollar invoicing is widespread among exporters, she does not see a strong case for moving away from the “well-established benefits of flexible exchange-rates.”

She also discussed the impact of trade barriers, which she said may appear muted so far, but are likely to be damaging to growth, even for large economies like the U.S.

“If the initial effects are amplified by falls in confidence and higher uncertainty, the overall slowdown may be larger still,” she said, and even more material for smaller economies.

Finally, Tenreyro previewed upcoming research considering the so-called “doom loop” of banks concentrating their holdings in the sovereign debt of their home nation. She found that completely diversifying banks’ holdings of government assets across countries creates it own risks, by decreasing government’s incentive to avoid default in order to support its domestic banks.

©2019 Bloomberg L.P.

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