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.
The method is based on the bounds testing approach to cointegration and error‐correction modeling.
The main finding is that while UK inpayments are not sensitive to the exchange rate, her outpayments are.
Future research must concentrate on disaggregating data further, perhaps at commodity level.
The results could be used to identify Britain's trading partners against which Britain can devalue the pound and improve her trade balance.
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.
