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The Optimal Volume of Foreign Trade and the Exchange Rate
Andras Nagy
Janos Stahl
Abstract
This paper discusses a foreign trade optimization model, which minimizes domestic expenditures, subject to the conditions that both the export programs and the substitutable import programs belong to a convex set and that the net revenue from foreign exchange exceed a prescribed limit. It considers the splitting of this question into two separate programming problems: one for export activities, and one for import activities and import substitution. The interrelations between the optimal volume of foreign trade and the marginal exchange rate are shown.
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