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On Trade Impact of Exchange Rate Volatility and Institutional Quality: The Case of Central European Countries

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  • Ferto, Imre
  • Fogarasi, Jozsef

Abstract

This paper explores the effect of exchange rate volatility and of the institutional quality on international trade flows of transition economies in Central European Countries by applying a gravity model of balance panel between 1999 and 2008. The results show that nominal exchange rate volatility has had a significant negative effect on trade by applying Psuedo-Maximum-Likelihood (PML) estimator method over this period. The institutional quality need to be improved in case of size of government and the quality of regulation. The negative effect of exchange rate volatility on agricultural exports suggests that joining Central European Countries to the euro zone can reduce the negative effects of exchange rate volatility on trade.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 123rd Seminar, February 23-24, 2012, Dublin, Ireland with number 122510.

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Date of creation: 23 Feb 2012
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Handle: RePEc:ags:eaa123:122510

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Keywords: international trade; gravity model; exchange rate volatility; institutions.; International Relations/Trade; Risk and Uncertainty; G10; F11; O17; Q17; P29;

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Cited by:
  1. 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.

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