How Sensitive Are Britain’s Inpayments and Outpayments to the Value of the British Pound

Purpose – To avoid aggregation bias by using trade data at bilateral level so that we can determine how sensitive are Britain’s inpayments and outpayments to the value of the British pound.Design/methodology/approach – The method is based on the bounds testing approach to cointegration and error-correction modeling. Findings – The main finding is that while UK inpayments are not sensitive to the exchange rate, her outpayments are.Research limitations/implications – Future research must concentrate on disaggregating data further, perhaps at commodity level.Practical implications – The results could be used to identify Britain’s trading partners against which Britain can devalue the pound and improve her trade balance.Originality/value – No study has attempted to test the impact of real depreciation of the pound on Britain’s payments and receipts with her major trading partners