§ Mr. Austin Mitchellasked the Chancellor of the Exchequer (1) what is his latest estimate of (a) the time taken for exchange rate changes to be substantially reflected in the figures for United Kingdom exports of manufactures and (b) the reduction in exports to be expected from a 1 per cent. reduction in the real exchange rate;
(2) what is his latest estimate of the time taken for exchange rate changes substantially to be reflected in the figures for United Kingdom imports of manufactures and of the increase to be expected from a 1 per cent. reduction in the real exchange rate, showing imports of semi-manufactures and finished manufactures as well as total manufactures.
§ Mr. LawsonExchange rate changes are only one of the factors which determine United Kingdom competitiveness. The long run cost competitiveness elasticities in use in the most recent version of the Treasury macroeconomic model are:
536W
Percentage change in volumes per 1 per cent. reduction in United Kingdom relative costs Exports of manufactures +¾ Imports of semi-manufactures −¼ Imports of finished manufactures ½ Official borrowings and repayments by the public sector in foreign currencies (including both loans under the exchange cover scheme and other borrowing) have been as follows:
It is estimated that it can take up to four years for the full effects on export volumes of a change in competitiveness to come through; and up to two years in the case of import volumes. These estimates are inevitably subject to a wide margin of error.
§ Mr. Austin Mitchellasked the Chancellor of the Exchequer (1) what has been the reduction in the real exchange rate since April; and when he expects this to show up substantially in the export figures for manufactures;
(2) what has been the increase in the real exchange rate since 1 April; and when he expects this to show up in the figures for imports of manufactures;
(3) whether he will circulate a table in the Official Report showing the increase in the real exchange rate since (a) November 1976, (b) January 1979 and (c) January 1980 based on the rate of exchange on 24 October 1980 and extrapolating trends in the United Kingdom and the other countries concerned.
§ Mr. LawsonI refer the hon. Member to the replies I gave him on 3 November.
§ Mr. Austin Mitchellasked the Chancellor of the Exchequer if he will provide 537W an estimate of the reduction in the effective exchange rate to be expected from a reduction of 1 per cent. in interest rates relative to the rate in the United States of America.
§ Mr. LawsonThe effect on the exchange rate of a reduction of United Kingdom interest rates relative to United States rates, if any, would depend upon the circumstances of the time. There is no stable or reliable relationship between interest rates and the exchange rate.