§ Mr. Austin Mitchellasked the Secretary of State for Trade and Industry what is the increase in the real exchange rate against the deutschmark since the fourth quarter of 1976; and if he will assess the effect of this on trade in manufactures with West Germany.
§ Mr. ChannonNo definite estimate can be made of the increase in the real exchange rate. Calculations of real exchange rates involve applying measures of relative prices to nominal exchange rates. The resulting calculations can vary considerably according to which measure of inflation is used, and the correct choice would vary according to the purpose to which the figure was going to be put.
It is not possible to assess the impact on trade of a change in the real exchange rate against one currency without taking into account other real exchange rate changes.
§ Mr. Austin Mitchellasked the Secretary of State for Trade and Industry if he will assess what effect the rise in exchange rate, since the end of March, will have on the production of textiles in the United Kingdom.
§ Mr. ChannonIt is not possible to make such an assessment without consideration of the macroeconomic conditions that would otherwise have existed, and without taking into account the exchange rate changes that took place prior to March, the extent to which firms anticipated the appreciation in the exchange rate since March, and their expectations regarding the future level of the exchange rate.