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Exchange Rate Uncertainty and Export Performance: Supply and Demand Effects

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  • Holly, Sean

Abstract

Unpredictable fluctuations in the exchange rate can increase the uncertainty that suppliers face in overseas markets if contracts are written in foreign currency. There is an extensive literature on how the volatility of exchange rates can affect trade patterns. In this paper, the author does two things. First he examines how exchange rate uncertainty can affect both the supply of and demand for exports. He then uses a generalized ARCH process to represent the volatility of the exchange rate. Our results suggest that exchange rate volatility does have a role to play in explaining the supply of exports but does not have a significant effect on the demand for exports. However, the effect, though significant statistically, is small. Copyright 1995 by Scottish Economic Society.

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Bibliographic Info

Article provided by Scottish Economic Society in its journal Scottish Journal of Political Economy.

Volume (Year): 42 (1995)
Issue (Month): 4 (November)
Pages: 381-91

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Handle: RePEc:bla:scotjp:v:42:y:1995:i:4:p:381-91

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Cited by:
  1. Stilianos Fountas & Kyriacos Aristotelous, 1998. "Has the European Monetary System Led to More Exports? Evidence from Four European Union Countries," Working Papers 31, National University of Ireland Galway, Department of Economics, revised 1998.
  2. Chit, Myint Moe & Rizov, Marian & Willenbockel, Dirk, 2008. "Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies," MPRA Paper 9014, University Library of Munich, Germany.
  3. Chongcheul Cheong & Tesfa Mehari & Leighton Williams, 2006. "Dynamic Links Between Unexpected Exchange Rate Variation, Prices, and International Trade," Open Economies Review, Springer, vol. 17(2), pages 221-233, April.
  4. Don Bredin & Stilianos Fountas & Eithne Murphy, 2003. "An Empirical Analysis of Short-run and Long-run Irish Export Functions: Does exchange rate volatility matter?," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(2), pages 193-208.
  5. Julia Darby & Andrew Hughes Hallett & Jonathan Ireland & Laura Piscitelli, 2000. "Exchange Rate Uncertainty and Business Sector Investment," Econometric Society World Congress 2000 Contributed Papers 0600, Econometric Society.
  6. Scheide, Joachim & Solveen, Ralph, 1997. "Should the European Central Bank worry about exchange rates?," Kiel Working Papers 800, Kiel Institute for the World Economy.
  7. Cheong, Chongcheul & Mehari, Tesfa & Williams, Leighton Vaughan, 2005. "The effects of exchange rate volatility on price competitiveness and trade volumes in the UK: A disaggregated approach," Journal of Policy Modeling, Elsevier, vol. 27(8), pages 961-970, November.
  8. repec:ebl:ecbull:v:6:y:2004:i:4:p:1-8 is not listed on IDEAS
  9. Akram Shavkatovich Hasanov Author_Email: & Ahmad Zubaidi Baharumshah & Mahendran Shitan & Zainidin Karimovich Eshkuvatov, 2011. "Exchange Rate Risk And Trade Flows: A Gravity Equation Approach," 2nd International Conference on Business and Economic Research (2nd ICBER 2011) Proceeding 2011-312, Conference Master Resources.
  10. Eichengreen, Barry, 1998. "Does Mercosur Need a Single Currency?," Center for International and Development Economics Research, Working Paper Series qt6fw631qn, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  11. P�l Boug & Andreas Fagereng, 2010. "Exchange rate volatility and export performance: a cointegrated VAR approach," Applied Economics, Taylor & Francis Journals, vol. 42(7), pages 851-864.
  12. Molina, Imelda R. & Mohanty, Samarendu & Pede, Valerien O. & Valera, Harold, 2013. "Modeling the Effects of Exchange Rate Volatility on Thai Rice Exports," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150429, Agricultural and Applied Economics Association.
  13. Chongcheul Cheong, 2004. "Does the risk of exchange rate fluctuation really affect international trade flows between countries?," Economics Bulletin, AccessEcon, vol. 6(4), pages 1-8.

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