On the sensitivity of the volume and volatility of bilateral trade flows to exchange rate uncertainty
AbstractWe present an empirical investigation of the hypotheses that exchange rate uncertainty may have an impact on both the volume and variability of trade flows by considering a broad set of industrial countries' bilateral real trade flows over the period 1980-1998. Similar to the findings of earlier theoretical and empirical research, our first set of results shows that the impact of exchange rate uncertainty on trade flows is indeterminate. Our second set of results provides new and novel findings that exchange rate uncertainty has a consistent positive and significant effect on the volatility of bilateral trade flows, helping us better understand macroeconomic volatility.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of International Money and Finance.
Volume (Year): 29 (2010)
Issue (Month): 1 (February)
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30443
Exchange rates Trade flow variability Volatility Trade flows;
Other versions of this item:
- Christopher F. Baum & Mustafa Caglayan, 2006. "On the Sensitivity of the Volume and Volatility of Bilateral Trade Flows to Exchange Rate Uncertainty," Boston College Working Papers in Economics 641, Boston College Department of Economics, revised 06 Feb 2008.
- F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
- F31 - International Economics - - International Finance - - - Foreign Exchange
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tenreyro, Silvana, 2007.
"On the trade impact of nominal exchange rate volatility,"
Journal of Development Economics,
Elsevier, vol. 82(2), pages 485-508, March.
- Silvana Tenreyro, 2003. "On the trade impact of nominal exchange rate volatility," Working Papers 03-2, Federal Reserve Bank of Boston.
- Giovanni Dell'Ariccia, 1998.
"Exchange Rate Fluctuations and Trade Flows - Evidence from the European Union,"
IMF Working Papers
98/107, International Monetary Fund.
- Giovanni Dell'Ariccia, 1999. "Exchange Rate Fluctuations and Trade Flows: Evidence from the European Union," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 5.
- Christopher F. Baum & Vince Wiggins, 2001. "Tests for long memory in a time series," Stata Technical Bulletin, StataCorp LP, vol. 10(57).
- Viaene, J-M. & De Vries, C.G., 1989.
"International Trade And Exchange Rate Volatility,"
8905, Erasmus University of Rotterdam - Institute for Economic Research.
- Pagan, Adrian, 1984. "Econometric Issues in the Analysis of Regressions with Generated Regressors," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(1), pages 221-47, February.
- Karolyi, G Andrew, 1995. "A Multivariate GARCH Model of International Transmissions of Stock Returns and Volatility: The Case of the United States and Canada," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 11-25, January.
- Sercu, Piet & Vanhulle, Cynthia, 1992. "Exchange rate volatility, international trade, and the value of exporting firms," Journal of Banking & Finance, Elsevier, vol. 16(1), pages 155-182, February.
- Christopher F. Baum & Mustafa Caglayan & Neslihan Ozkan, 2004.
"Nonlinear effects of exchange rate volatility on the volume of bilateral exports,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 19(1), pages 1-23.
- Christopher F. Baum & Mustafa Caglayan & Neslihan Ozkan, 2000. "Nonlinear Effects of Exchange Rate Volatility on the Volume of Bilateral Exports," Boston College Working Papers in Economics 488, Boston College Department of Economics, revised 30 Jul 2002.
- 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.
- Adrian Pagan, 1985.
"Two Stage and Related Estimators and Their Applications,"
Cowles Foundation Discussion Papers
741, Cowles Foundation for Research in Economics, Yale University.
- Pagan, Adrian, 1986. "Two Stage and Related Estimators and Their Applications," Review of Economic Studies, Wiley Blackwell, vol. 53(4), pages 517-38, August.
- Caglayan, M. & Baum, C.F. & Barkoulas, J.T., 1998.
"Exchange Rate Effects on the Volume and Variability of Trade Flows,"
1998/05, Koc University.
- Barkoulas, John T. & Baum, Christopher F. & Caglayan, Mustafa, 2002. "Exchange rate effects on the volume and variability of trade flows," Journal of International Money and Finance, Elsevier, vol. 21(4), pages 481-496, August.
- John Barkoulas & Christopher F. Baum & Mustafa Caglayan, 1998. "Exchange Rate Effects on the Volume and Variability of Trade Flows," Boston College Working Papers in Economics 405., Boston College Department of Economics, revised 12 Sep 2001.
- Christian Zimmermann, 1994.
"International Business Cycles and Exchange Rates,"
Cahiers de recherche CREFE / CREFE Working Papers
33, CREFE, Université du Québec à Montréal, revised Jul 1997.
- Philippe BACCHETTA & Eric VAN WINCOOP, 1999.
"Does Exchange Rate Stability Increase Trade and Welfare ?,"
Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP)
9917, Université de Lausanne, Faculté des HEC, DEEP.
- Eric van Wincoop & Philippe Bacchetta, 2000. "Does Exchange-Rate Stability Increase Trade and Welfare?," American Economic Review, American Economic Association, vol. 90(5), pages 1093-1109, December.
- Charles Engel & Jian Wang, 2007. "International trade in durable goods: understanding volatility, cyclicality, and elastics," Globalization and Monetary Policy Institute Working Paper 03, Federal Reserve Bank of Dallas.
- Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 7-46, 04.
- Wei, Shang-Jin, 1999.
"Currency hedging and goods trade,"
European Economic Review,
Elsevier, vol. 43(7), pages 1371-1394, June.
- Peter C.B. Phillips, 1999.
"Unit Root Log Periodogram Regression,"
Cowles Foundation Discussion Papers
1244, Cowles Foundation for Research in Economics, Yale University.
- Baron, David P, 1976. "Fluctuating Exchange Rates and the Pricing of Exports," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 425-38, September.
- 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.
- Franke, Gunter, 1991. "Exchange rate volatility and international trading strategy," Journal of International Money and Finance, Elsevier, vol. 10(2), pages 292-307, June.
- Peter B. Clark & Shang-Jin Wei & Natalia T. Tamirisa & Azim M. Sadikov & Li Zeng, 2004. "A New Look at Exchange Rate Volatility and Trade Flows," IMF Occasional Papers 235, International Monetary Fund.
- Jeffrey A. Frankel and Shang-Jin Wei., 1993.
"Emerging Currency Blocs,"
Center for International and Development Economics Research (CIDER) Working Papers
C93-026, University of California at Berkeley.
- Joseph E. Gagnon, 1989.
"Exchange rate variability and the level of international trade,"
International Finance Discussion Papers
369, Board of Governors of the Federal Reserve System (U.S.).
- Gagnon, Joseph E., 1993. "Exchange rate variability and the level of international trade," Journal of International Economics, Elsevier, vol. 34(3-4), pages 269-287, May.
- Baillie, Richard T., 1996. "Long memory processes and fractional integration in econometrics," Journal of Econometrics, Elsevier, vol. 73(1), pages 5-59, July.
- Christopher F Baum, 2000. "FRACDIFF: Stata module to generate fractionally-differenced timeseries," Statistical Software Components S413901, Boston College Department of Economics, revised 24 Mar 2006.
- Kevin B. Grier & Aaron D. Smallwood, 2007. "Uncertainty and Export Performance: Evidence from 18 Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(4), pages 965-979, 06.
- Demir, Firat & Caglayan, Mustafa & Dahi, Omar S., 2012.
"Trade flows, exchange rate uncertainty and financial depth: evidence from 28 emerging countries,"
37400, University Library of Munich, Germany.
- Mustafa Caglayan & Omar S. Dahi & Firat Demir, 2013. "EsTrade Flows, Exchange Rate Uncertainty, and Financial Depth: Evidence from 28 Emerging Countries," Southern Economic Journal, Southern Economic Association, vol. 79(4), pages 905-927, April.
- Mustafa Caglayan & Omar S. Dahi & Firat Demir, 2010. "Trade Flows, Exchange Rate Uncertainty and Financial Depth: Evidence from 28 Emerging Countries," Working Papers 2010011, The University of Sheffield, Department of Economics, revised May 2010.
- Demir, Firat, 2011.
"Growth under Exchange Rate Volatility: Does Access to Foreign or Domestic Equity Markets Matter?,"
37398, University Library of Munich, Germany.
- Demir, Firat, 2013. "Growth under exchange rate volatility: Does access to foreign or domestic equity markets matter?," Journal of Development Economics, Elsevier, vol. 100(1), pages 74-88.
- Marc Auboin & Michele Ruta, 2012.
"The Relationship between Exchange Rates and International Trade: A Literature Review,"
CESifo Working Paper Series
3868, CESifo Group Munich.
- Auboin, Marc & Ruta, Michele, 2013. "The relationship between exchange rates and international trade: a literature review," World Trade Review, Cambridge University Press, vol. 12(03), pages 577-605, July.
- Zhang, Guoxiong, 2012. "Bayesian estimation of exchange rate regime choice with spatial effect," Economics Letters, Elsevier, vol. 117(3), pages 604-607.
- Amalia Morales-Zumaquero & Simón Sosvilla-Rivero, 2012. "Real exchange rate volatility, financial crises and nominal exchange regimes," Working Papers 12-05, Asociación Española de Economía y Finanzas Internacionales.
- Demir, Firat & Caglayan, Mustafa, 2012.
"Firm Productivity, Exchange Rate Movements, Sources of Finance and Export Orientation,"
37397, University Library of Munich, Germany.
- Caglayan, Mustafa & Demir, Firat, 2014. "Firm Productivity, Exchange Rate Movements, Sources of Finance, and Export Orientation," World Development, Elsevier, vol. 54(C), pages 204-219.
- Grier, Kevin B. & Smallwood, Aaron D., 2013. "Exchange rate shocks and trade: A multivariate GARCH-M approach," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 282-305.
- 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.
- 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.
- Christopher F. Baum & Mustafa Caglayan, 2008. "The Volatility of International Trade Flows and Exchange Rate Uncertainty," Boston College Working Papers in Economics 695, Boston College Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.