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The Impact of Exchange Rate Fluctuations on European Union Trade

Author

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  • Sapir, André
  • Sekkat, Khalid
  • Weber, Axel A

Abstract

The impact of exchange rate fluctuations on international trade has long been a major concern for policy-makers. This is particularly the case in Europe, where countries trade extensively with each other. The crisis that began in the Summer of 1992 generated increased exchange rate fluctuations and, therefore, renewed concerns about consequences for trade inside the European Union. This report assesses the likely impact of the exchange rate crisis on trade flows inside and outside the Union. The analysis indicates the need to distinguish between short-term oscillations (i.e. volatility) and medium-term fluctuations (i.e. misalignment). We find that the recent ERM crisis is likely to have had some negative impact on trade within the region, but this impact is probably quite small.

Suggested Citation

  • Sapir, André & Sekkat, Khalid & Weber, Axel A, 1994. "The Impact of Exchange Rate Fluctuations on European Union Trade," CEPR Discussion Papers 1041, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1041
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    Citations

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    Cited by:

    1. Patrick Honohan & Philip R. Lane, 1999. "Pegging to the Dollar and the Euro," International Finance, Wiley Blackwell, vol. 2(3), pages 379-410, November.
    2. Aliyu, Shehu Usman Rano, 2008. "Exchange Rate Volatility and Export Trade in Nigeria: An Empirical Investigation," MPRA Paper 13490, University Library of Munich, Germany, revised 17 Feb 2009.
    3. Muteba Mwamba, John & Dube, Sandile, 2014. "The impact of exchange rate volatility on international trade between South Africa, China and USA: The case of the manufacturing sector," MPRA Paper 64389, University Library of Munich, Germany.
    4. Gil-Pareja, Salvador & Llorca-Vivero, Rafael & Martínez-Serrano, José Antonio, 2008. "Trade effects of monetary agreements: Evidence for OECD countries," European Economic Review, Elsevier, vol. 52(4), pages 733-755, May.
    5. Khalid Sekkat, 2001. "On the Aggregate Impact of Exchange Rate Variability on EU Trade," German Economic Review, Verein für Socialpolitik, vol. 2(1), pages 57-78, February.
    6. Olimov, Ulugbek & Sirajiddinov, Nishanbay, 2008. "The Effects of the Real Exchange Rate Volatility and Misalignments on Foreign Trade Flows in Uzbekistan," MPRA Paper 9749, University Library of Munich, Germany.
    7. Agnès Bénassy-Quéré & Amina Lahrèche-Revil, 2003. "Trade Linkages and Exchange Rates in Asia: The Role of China," Working Papers 2003-21, CEPII research center.
    8. Paul Grauwe & Frauke Skudelny, 2000. "The impact of EMU on trade flows," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(3), pages 381-402, September.
    9. Whyman, Philip, 2002. "Living with the Euro: the consequences for world business," Journal of World Business, Elsevier, vol. 37(3), pages 208-215, October.
    10. Edgar Morgenroth, 2000. "Exchange rates and trade: the case of Irish exports to Britain," Applied Economics, Taylor & Francis Journals, vol. 32(1), pages 107-110.
    11. Anderton, R. & Skudelny, F., 2001. "Exchange Rate Volatility and Euro Area Imports," Papers 64, Quebec a Montreal - Recherche en gestion.
    12. Amina Lahrèche-Révil & Juliette Milgram, 2006. "Exchange-rate policies and trade in the MENA countries," ThE Papers 06/07, Department of Economic Theory and Economic History of the University of Granada..
    13. Hallett, Andrew Hughes & Anthony, Myrvin L., 1997. "Exchange rate behaviour under the EMS regime: was there any systematic change?," Journal of International Money and Finance, Elsevier, vol. 16(4), pages 537-560, August.
    14. Afonso S. Bevilaqua, 1997. "Macroeconomic coordination and commercial integration in MERCOSUR," Textos para discussão 378, Department of Economics PUC-Rio (Brazil).

    More about this item

    Keywords

    EMS; Exchange Rates; Misalignments; Trade; Volatility;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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