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The Effects of Exchange-Rate Volatility on Korean Trade Flows: Industry-Level Estimates

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  • Mohsen Bahmani-Oskooee
  • Scott W. Hegerty
  • Ruixin Zhang

Abstract

type="main" xml:id="ecpa12064-abs-0001"> As one of the world's most important exporters, Korea might find volatility in the won to be detrimental to trade. But, since previous studies – as well as economic theory – suggest that the impact of exchange-rate risk on individual countries trade flows can be ambiguous, each case must be tested empirically. This study does, examining 148 Korean export industries and 144 import industries vis-à-vis the rest of the world. We find that in the long run, twenty export industries respond negatively to exchange-rate risk, while twelve respond positively. For imports, however, eight have negative coefficients and fourteen have positive ones. The majority of industries are unaffected. Small Korean exporters are particularly vulnerable to exchange-rate risk, as are two large export industries. Imports in the Machinery and transport equipment sector, particularly automobiles, are most likely to see a decrease in the overall trade balance due to increased risk.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Scott W. Hegerty & Ruixin Zhang, 2014. "The Effects of Exchange-Rate Volatility on Korean Trade Flows: Industry-Level Estimates," Economic Papers, The Economic Society of Australia, vol. 33(1), pages 76-94, March.
    • Handle: RePEc:bla:econpa:v:33:y:2014:i:1:p:76-94
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    File URL: http://hdl.handle.net/10.1111/ecpa.2014.33.issue-1
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    Cited by:

    1. Mohsen Bahmani‐Oskooee & Jungho Baek, 2021. "On the asymmetric effects of exchange‐rate volatility on trade flows: Evidence from Korea‐U.S. commodity trade," Australian Economic Papers, Wiley Blackwell, vol. 60(4), pages 594-629, December.
    2. Lee, Chien-Hui & Li, Shu-Hui & Lee, Jen-Yu, 2022. "An asymmetric impact analysis of the exchange rate volatility on commodity trade between the U.S. and China," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 399-415.
    3. Mohsen Bahmani-Oskooee & Jungho Baek & Scott W. Hegerty, 2016. "GARCH-based versus traditional measures of exchange-rate volatility: evidence from Korean industry trade," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 9(2), pages 103-136.
    4. Mohsen Bahmani-Oskooee & Scott W. Hegerty & Kaveepot Satawatananon, 2015. "Exchange-Rate Risk and Japanese–Thai Industry Trade," Australian Economic Papers, Wiley Blackwell, vol. 54(1), pages 22-37, March.

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