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Exchange-Rate Volatility and Foreign Trade: Evidence from Thirteen LDC's

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  • Arize, Augustine C
  • Osang, Thomas
  • Slottje, Daniel J

Abstract

This article investigates empirically the impact of real exchange-rate volatility on the export flows of 13 less developed countries (LDCs) over the quarterly period 1973-1996. Estimates of the cointegrating relations are obtained using Johansen's multivariate procedure. Estimates of the short-run dynamics are obtained for each country using the error-correction technique. The major results show that increases in the volatility of the real effective exchange rate, approximating exchange-rate uncertainty, exert a significant negative effect on export demand in both the short-run and the long-run in each of the 13 LDCs. These effects may result in significant reallocation of resources by market participants.

Suggested Citation

  • Arize, Augustine C & Osang, Thomas & Slottje, Daniel J, 2000. "Exchange-Rate Volatility and Foreign Trade: Evidence from Thirteen LDC's," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 10-17, January.
  • Handle: RePEc:bes:jnlbes:v:18:y:2000:i:1:p:10-17
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