Effects of Exchange Rate Volatility on the Volume and Volatility of Bilateral Exports
AbstractWe present an empirical investigation of a recently suggested but untested proposition that exchange rate volatility can have an impact on both the volume and variability of trade flows, considering a broad set of countries' bilateral real trade flows over the period 1980-1998. We generate proxies for the volatility of real trade flows and real exchange rates after carefully scrutinizing these variables' time series properties. Similar to the findings of earlier theoretical and empirical research, our first set of results show that the impact of exchange rate uncertainty on trade flows is indeterminate. Our second set of results provide new and novel findings that exchange rate volatility has a consistent positive and significant effect on the volatility of bilateral trade flows.
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Bibliographic InfoPaper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2006 with number 64.
Date of creation: 02 Feb 2007
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exchange rates; volatility; fractional integration; trade flows;
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-2007-04-09 (All new papers)
- NEP-CBA-2007-04-09 (Central Banking)
- NEP-IFN-2007-04-09 (International Finance)
- NEP-INT-2007-04-09 (International Trade)
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