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Exchange-rate volatility and export performance: Do emerging market economies resemble industrial countries or other developing countries?

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Author Info

  • Hall, Stephen
  • Hondroyiannis, George
  • Swamy, P.A.V.B.
  • Tavlas, George
  • Ulan, Michael

Abstract

Authors who do not distinguish between Emerging Market Economies (EMEs) and other developing countries, find evidence of negative and significant effects of exchange-rate volatility on trade. We investigate the effects of real exchange-rate volatility on exports of ten EMEs and eleven other developing countries that were not classified as EMEs over our estimation period. We use panel-data sets that cover the periods 1980:Q1-2006:Q4 for the EMEs and 1980:Q1-2005:Q4 for the other developing countries. We use two estimation methods -- generalized method of moments (GMM) estimation and time-varying-coefficient (TVC) estimation. The TVC procedure removes specification biases from the coefficients, revealing the underlying stable parameters of interest. We obtain similar results as previous authors for only the eleven non-EME developing countries we consider. In contrast, our results for the EMEs do not show a negative and significant effect of exchange-rate volatility on the exports of the countries considered. Our findings suggest that the open capital markets of EMEs may have reduced the effects of exchange-rate fluctuations on exports compared with those effects in the cases of other developing countries.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 27 (2010)
Issue (Month): 6 (November)
Pages: 1514-1521

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Handle: RePEc:eee:ecmode:v:27:y:2010:i:6:p:1514-1521

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Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Exchange-rate volatility Trade Random-coefficient estimation Generalized method of moments Panel data;

References

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  1. repec:fth:inadeb:418 is not listed on IDEAS
  2. Sauer, Christine & Bohara, Alok K, 2001. "Exchange Rate Volatility and Exports: Regional Differences between Developing and Industrialized Countries," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 133-52, February.
  3. Doroodian, K., 1999. "Does exchange rate volatility deter international trade in developing countries?," Journal of Asian Economics, Elsevier, vol. 10(3), pages 465-474.
  4. Rahmatsyah, Teuku & Rajaguru, Gulasekaran & Siregar, Reza Y., 2002. "Exchange-rate volatility, trade and "fixing for life" in Thailand," Japan and the World Economy, Elsevier, vol. 14(4), pages 445-470, December.
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  6. George S. Tavlas & P.A.V.B. Swamy, 2006. "The New Keynesian Phillips Curve and Inflation Expectations: Re-Specification and Interpretation," Working Papers 34, Bank of Greece.
  7. Arize, Augustine C & Osang, Thomas & Slottje, Daniel J, 2000. "Exchange-Rate Volatility and Foreign Trade: Evidence from Thirteen LDC's," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 10-17, January.
  8. Krugman, Paul, 1989. "Differences in income elasticities and trends in real exchange rates," European Economic Review, Elsevier, vol. 33(5), pages 1031-1046, May.
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  11. Tenreyro, Silvana, 2007. "On the trade impact of nominal exchange rate volatility," Journal of Development Economics, Elsevier, vol. 82(2), pages 485-508, March.
  12. Hondroyiannis, George & Swamy, P.A.V.B. & Tavlas, George S., 2009. "The New Keynesian Phillips Curve In A Time-Varying Coefficient Environment: Some European Evidence," Macroeconomic Dynamics, Cambridge University Press, vol. 13(02), pages 149-166, April.
  13. McKenzie, Michael D, 1999. " The Impact of Exchange Rate Volatility on International Trade Flows," Journal of Economic Surveys, Wiley Blackwell, vol. 13(1), pages 71-106, February.
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  15. Arize, Augustine C. & Osang, Thomas & Slottje, Daniel J., 2008. "Exchange-rate volatility in Latin America and its impact on foreign trade," International Review of Economics & Finance, Elsevier, vol. 17(1), pages 33-44.
  16. Murat Doğanlar, 2002. "Estimating the impact of exchange rate volatility on exports: evidence from Asian countries," Applied Economics Letters, Taylor & Francis Journals, vol. 9(13), pages 859-863.
  17. Serge Rey, 2006. "Effective Exchange Rate Volatility And Mena Countries Exports To The Eu," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 31(2), pages 23-54, December.
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Citations

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Cited by:
  1. Nishimura, Yusaku & Hirayama, Kenjiro, 2013. "Does exchange rate volatility deter Japan-China trade? Evidence from pre- and post-exchange rate reform in China," Japan and the World Economy, Elsevier, vol. 25, pages 90-101.
  2. Carmen Sandu & Nicolae Ghiba, 2011. "The Relationship Between Exchange Rate And Exports In Romania Using A Vector Autoregressive Model," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(13), pages 29.
  3. Ghiba, Nicolae, 2010. "Efecte ale volatilității cursului de schimb asupra exporturilor
    [Effects of exchange rate volatility on exports]
    ," MPRA Paper 28448, University Library of Munich, Germany.
  4. Halmi Mirela, 2012. "The Correlation Between The Exchange Rate And The Direct Foreign Investments," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 809-815, July.

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