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Exchange-rate volatility and trade: a semiparametric approach

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  • Debasri Mukherjee
  • Susan Pozo

Abstract

We use a gravity model to analyse the impact of exchange-rate volatility on the volume of bilateral international trade. Semiparametric regression methods are applied to the pooled data for over 200 countries. Our results indicate that volatility affects trade negatively although at very high level of volatility the effect diminishes and eventually becomes statistically indistinguishable from zero. Countries apparently find avenues to mitigate the detrimental impact of exchange rate uncertainty when volatility attains very high levels. These results help reconcile the contradictory findings often found in the literature on the impact of exchange-rate uncertainty on trade volume.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840802600327
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 43 (2011)
Issue (Month): 13 ()
Pages: 1617-1627

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Handle: RePEc:taf:applec:v:43:y:2011:i:13:p:1617-1627

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Cited by:
  1. Matthieu Bussière & Jarko Fidrmuc & Bernd Schnatz, 2008. "EU Enlargement and Trade Integration: Lessons from a Gravity Model," Review of Development Economics, Wiley Blackwell, vol. 12(3), pages 562-576, 08.
  2. Luo, June & Gerard, Patrick, 2013. "Using thresholding difference-based estimators for variable selection in partial linear models," Statistics & Probability Letters, Elsevier, vol. 83(12), pages 2601-2606.
  3. Estrella Gómez & Juliette Milgram Baleix, 2012. "EMU impact of on third countries’ exports. A gravity approach," ThE Papers 10/26, Department of Economic Theory and Economic History of the University of Granada..

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