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The Effect of Exchange Rate Volatility on International Trade: The Implication for Production Networks in East Asia

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Author Info
Hayakawa, Kazunobu
Kimura, Fukunari

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Abstract

This paper is an empirical investigation of the relationship between exchange rate volatility and international trade, focusing on East Asia. It finds that intra-East Asian trade is discouraged by exchange rate volatility more seriously than trade in other regions because intermediate goods trade in production networks, which is quite sensitive to exchange rate volatility compared with other types of trade, occupies a significant fraction of trade. In addition, this negative effect of volatility is mainly induced by the unanticipated volatility and has an even greater impact than that of tariffs.

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File URL: http://ir.ide.go.jp/dspace/bitstream/2344/764/1/ARRIDE_Discussion_No.156_hayakawa.pdf
File Format: application/pdf
File Function: First version, 2008
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Publisher Info
Paper provided by Institute of Developing Economies, Japan External Trade Organization(JETRO) in its series IDE Discussion Papers with number 156.

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Date of creation: May 2008
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Publication status: Published in IDE Discussion Paper. No. 156. 2008.5
Handle: RePEc:jet:dpaper:dpaper156

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Related research
Keywords: Exchange rate volatility; Trade; East Asia; International trade; Foreign exchange;

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Find related papers by JEL classification:
F10 - International Economics - - Trade - - - General
F31 - International Economics - - International Finance - - - Foreign Exchange
N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Kozo Kiyota & Shujiro Urata, 2004. "Exchange Rate, Exchange Rate Volatility and Foreign Direct Investment," The World Economy, Blackwell Publishing, vol. 27(10), pages 1501-1536, November. [Downloadable!] (restricted)
  2. Azim M. Sadikov & Li Zeng & Peter B. Clark & Shang-Jin Wei & Natalia T. Tamirisa, 2004. "A New Look at Exchange Rate Volatility and Trade Flows," IMF Occasional Papers 235, International Monetary Fund.
  3. Mitsuyo Ando & Fukunari Kimura, 2005. "The Formation of International Production and Distribution Networks in East Asia," NBER Chapters, in: International Trade in East Asia, NBER-East Asia Seminar on Economics, Volume 14, pages 177-216 National Bureau of Economic Research, Inc. [Downloadable!]
    Other versions:
  4. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November. [Downloadable!] (restricted)
    Other versions:
  5. McKenzie, Michael D, 1999. " The Impact of Exchange Rate Volatility on International Trade Flows," Journal of Economic Surveys, Blackwell Publishing, vol. 13(1), pages 71-106, February. [Downloadable!] (restricted)
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This page was last updated on 2009-11-12.

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