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Volatility and Irish Exports

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Author Info

  • Don Bredin

    (University college Dublin)

  • John Cotter

    (University College Dublin, Ireland)

Abstract

We analyse the impact of volatility per se on exports for a a small open economy concentrating on Irish trade with the UK and the US. An important element is that we take account of the time lag between the trade decision and the actual trade or payments taking place by using a flexible lag approach. Rather than adopt a single measure of risk we also adopt a spectrum of risk measures and detail varied size characteristics and statistical properties. We find that the ambiguous results found to date may well be due to not taking account of the timing effect which varies substantially depending on which volatility measure is used. However, the foreign exchange volatility effect is consistently positive, indicating the dominance of exporters expectations of possible profitable opportunities from future cash flows. The potential negative aspects of trade, the entry and exit costs, are accounted for by a negative influence of income volatility on trade.

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Bibliographic Info

Paper provided by Geary Institute, University College Dublin in its series Working Papers with number 200416.

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Length: 37 pages
Date of creation: 24 Jun 2011
Date of revision:
Handle: RePEc:ucd:wpaper:2004/16

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Keywords: Exports; risk measurement; distributed lags;

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References

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Cited by:
  1. Grier, Kevin B. & Smallwood, Aaron D., 2013. "Exchange rate shocks and trade: A multivariate GARCH-M approach," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 282-305.

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