The Volatility of International Trade Flows and Exchange Rate Uncertainty
AbstractEmpirical evidence obtained from data covering Eurozone countries, other industrialized countries, and newly industrialized countries (NICs) over 1980–2006 shows that exchange rate uncertainty has a consistent positive and significant effect on the volatility of bilateral trade ﬂows. A one standard deviation increase in exchange rate uncertainty leads to an eight per cent increase in trade volatility. These effects differ markedly for trade ﬂows between industrialized countries and NICs, and are not mitigated by the presence of the Eurozone. Contrary to earlier ﬁndings, our results also suggest that exchange rate uncertainty does not affect the volume of trade ﬂows of either industrialized countries or NICs.
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Bibliographic InfoPaper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 695.
Date of creation: 27 Nov 2008
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exchange rates; uncertainty; volatility; trade ﬂows; industrialized countries; Eurozone; newly industrialized countries;
Find related papers by JEL classification:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-12-07 (All new papers)
- NEP-CBA-2008-12-07 (Central Banking)
- NEP-INT-2008-12-07 (International Trade)
- NEP-OPM-2008-12-07 (Open Economy Macroeconomics)
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