Question

Discuss why it is often asserted that exporters suffer when their home currencies appreciate in real terms against foreign currencies and prosper when their home currencies depreciate in real terms.

Answer 1

There are two parties involved in this transaction, the exporter and importer. When the exporter exports goods to the importer, the importer will pay in his or her home currency (importer's currency). So if the currency of the exporter depreciates and the currency of the importer appreciates, then the value of the exporter's currency goes down versus the importer's currency. With this, the exporter will receive less from the importer due to the exchange rate.