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On the sensitivity of the volume and volatility of bilateral trade flows to exchange rate uncertainty

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  • Baum, Christopher F.
  • Caglayan, Mustafa

Abstract

We 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.

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Bibliographic Info

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

Volume (Year): 29 (2010)
Issue (Month): 1 (February)
Pages: 79-93

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Handle: RePEc:eee:jimfin:v:29:y:2010:i:1:p:79-93

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

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Keywords: Exchange rates Trade flow variability Volatility Trade flows;

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References

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Citations

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Cited by:
  1. Marc Auboin & Michele Ruta, 2012. "The Relationship between Exchange Rates and International Trade: A Literature Review," CESifo Working Paper Series 3868, CESifo Group Munich.
  2. 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.
  3. 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.
  4. 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.
  5. 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.
  6. Demir, Firat & Caglayan, Mustafa, 2012. "Firm Productivity, Exchange Rate Movements, Sources of Finance and Export Orientation," MPRA Paper 37397, University Library of Munich, Germany.

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