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The Effects of the Real Exchange Rate Volatility and Misalignments on Foreign Trade Flows in Uzbekistan

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Author Info
Olimov, Ulugbek
Sirajiddinov, Nishanbay

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Abstract

This study documents a quantitative analysis of exchange rate volatilities and misalignment in Uzbekistan for the period of 1994q3–2005q2. The results suggest thatthe real exchange rate volatility and misalignment have depressing effects on the volume of trade, mainly exports in Uzbekistan. The Governments currency rationing policy was lessening the volatility proving that the policy-induced changes in exchange rate has a stabilizing effect on trade flows. The implied elasticity for the most significant real exchange rate volatility coefficient is -0.20. Using a two-step Engle-Granger technique import demand and export supply price elasticities are computed. The results are consistent with the predictions from a number of previous studies, and in particular, the estimated exports price elasticity for Uzbek economy ranges from 1.65 to 1.84, while import demand price elasticity is between -0.78 and -0.83. At the same time, relatively lower elasticity during ’the currency rationing’ period indicate that large devaluations, most likely, did not generate the expected improvements in the overall export performance.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 9749.

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Date of creation: Mar 2008
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Handle: RePEc:pra:mprapa:9749

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Related research
Keywords: real exchange rate; volatility; misalignment; trade flows; Uzbekistan;

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Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
F31 - International Economics - - International Finance - - - Foreign Exchange

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