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Is the Effect of Exchange Rate Volatility on Trade More Pronounced in Latin America than in Asia?

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  • Dieter Billen
  • Maria Melody Garcia
  • Nelli Khasanova

Abstract

This paper empirically investigates the impact of exchange rate volatility on East and Southeast Asian and Latin American exports from 1980 to 2004 by using a gravity model and panel data. The results show that exchange rate volatility negatively affects exports in both continents. However, the impact of exchange rate volatility is more pronounced in Latin America than in Asia for the whole sample period 1980-2004 and in the sub-period 1980- 1996, but not in the sub-period 1997-2004. Moreover, the results also show that countries with relatively high tariffs are less vulnerable to exchange rate volatility than open economies. Finally, evidence reveals that exports from high-income countries are less affected by exchange rate volatility.

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File URL: https://www.ifw-kiel.de/ausbildung/asp/asp-wp/2006/aspwp434.pdf
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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Advanced Studies Working Papers with number 434.

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Length: 25 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:kie:kieasw:434

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  15. Sauer, Christine & Bohara, Alok K, 2001. "Exchange Rate Volatility and Exports: Regional Differences between Developing and Industrialized Countries," Review of International Economics, Wiley Blackwell, vol. 9(1), pages 133-52, February.
  16. SaangJoon Baak, 2004. "Exchange Rate Volatility and Trade among the Asia Pacific Countries," Econometric Society 2004 Far Eastern Meetings 724, Econometric Society.
  17. Paul De Grauwe, 1988. "Exchange Rate Variability and the Slowdown in Growth of International Trade," IMF Staff Papers, Palgrave Macmillan, vol. 35(1), pages 63-84, March.
  18. Lastrapes, William D. & Koray, Faik, 1990. "Exchange rate volatility and U.S. multilateral trade flows," Journal of Macroeconomics, Elsevier, vol. 12(3), pages 341-362.
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