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Trade flows, exchange rate uncertainty and financial depth: evidence from 28 emerging countries

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  • Demir, Firat
  • Caglayan, Mustafa
  • Dahi, Omar S.

Abstract

This paper investigates the effects of real exchange rate uncertainty on manufactures exports from 28 emerging economies, representing 82\% of all developing country manufactures exports, and explores the sources of heterogeneity in the uncertainty effects by controlling for the direction of trade (South-North or South-South), and the level of financial development of the exporting country. The empirical results show that for more than half of the countries the uncertainty effect is unidirectional, either South-South or South-North, and the median impact is negative. In addition, while we find that financial development augments trade, exchange rate shocks can negate this effect. Last but not the least, trade among developing economies improves export growth under exchange rate shocks.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 37400.

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Date of creation: 01 Jan 2012
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Handle: RePEc:pra:mprapa:37400

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Keywords: Trade flows; Exchange rate uncertainty; South-South trade; Financial depth; Manufactured goods trade; Dynamic panel data;

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Cited by:
  1. Caglayan, Mustafa & Demir, Firat, 2014. "Firm Productivity, Exchange Rate Movements, Sources of Finance, and Export Orientation," World Development, Elsevier, Elsevier, vol. 54(C), pages 204-219.
  2. Joseph Dery Nyeadi & Oswald Atiga & Charles Amoyea Atogenzoya, 2014. "The Impact of Exchange Rate Movement on Export: Empirical Evidence from Ghana," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 4(3), pages 41-48, July.

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