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Does exchange rate risk affect exports asymmetrically? Asian evidence

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Author Info
Fang, WenShwo
Lai, YiHao
Miller, Stephen M.

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Abstract

This paper tests the hypothesis of asymmetric effects of exchange rate risk with a dynamic conditional correlation bivariate GARCH(1,1)-M model. The asymmetry means that exchange rate risk (volatility) affects exports differently during appreciations and depreciations, which may reflect exporter's asymmetric risk perception and hedging behavior. Using bilateral exports from eight Asian countries to the US, the real exchange rate risk significantly affects exports for all countries, negative or positive, in periods of depreciation or appreciation. Thus, policy makers can consider the stability of the exchange rate in addition to its depreciation as a method of controlling export growth.

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Publisher Info
Article provided by Elsevier in its journal Journal of International Money and Finance.

Volume (Year): 28 (2009)
Issue (Month): 2 (March)
Pages: 215-239
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Handle: RePEc:eee:jimfin:v:28:y:2009:i:2:p:215-239

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Web page: http://www.elsevier.com/locate/inca/30443

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Related research
Keywords: Exports Exchange rate risk Asymmetric hedging DCC bivariate GARCH-M model;

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