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Real Exchange Rate Volatility and US Exports: An ARDL Bounds Testing Approach

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  • G De Vita
  • A Abbott

Abstract

This paper examines the impact of exchange rate volatility on US exports to the rest of the world, and to each of its five main markets of destination by means of the recently developed ARDL bounds testing approach to cointegration, which is applicable irrespective of whether the regressors are I(1) or I(0). Using a long-term measure of volatility that captures persistence and mean-reversion in the movements of the real exchange rate, we find that in most of the cases considered export volume is significantly affected by volatility, although the sign and magnitude of this effect varies across markets of destination.

Suggested Citation

  • G De Vita & A Abbott, 2004. "Real Exchange Rate Volatility and US Exports: An ARDL Bounds Testing Approach," Economic Issues Journal Articles, Economic Issues, vol. 9(1), pages 69-78, March.
  • Handle: RePEc:eis:articl:104devita
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    References listed on IDEAS

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    5. Bleaney, Michael, 1992. "Comparisons of Real Exchange Rate Volatility across Exchange Rate Systems," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(4), pages 557-565, November.
    6. Kroner, Kenneth F. & Lastrapes, William D., 1993. "The impact of exchange rate volatility on international trade: Reduced form estimates using the GARCH-in-mean model," Journal of International Money and Finance, Elsevier, vol. 12(3), pages 298-318, June.
    7. Anders Rahbek & Rocco Mosconi, 1999. "Cointegration rank inference with stationary regressors in VAR models," Econometrics Journal, Royal Economic Society, vol. 2(1), pages 76-91.
    8. Kenen, Peter B & Rodrik, Dani, 1986. "Measuring and Analyzing the Effects of Short-term Volatility in Real Exchange Rates," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 311-315, May.
    9. Hassler, Uwe, 1996. "Spurious regressions when stationary regressors are included," Economics Letters, Elsevier, vol. 50(1), pages 25-31, January.
    10. Lastrapes, William D. & Koray, Faik, 1990. "Exchange rate volatility and U.S. multilateral trade flows," Journal of Macroeconomics, Elsevier, vol. 12(3), pages 341-362.
    11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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    Cited by:

    1. Bahmani-Oskooee, Mohsen & Hajilee, Massomeh, 2013. "Exchange rate volatility and its impact on domestic investment," Research in Economics, Elsevier, vol. 67(1), pages 1-12.
    2. BAHMANI-OSKOOEE, Mohsen & Aftab, Muhammad, 2016. "Malaysia-EU Trade at the Industry Level: Is there an Asymmetric Response to Exchange Rate Volatility?," MPRA Paper 82687, University Library of Munich, Germany, revised 11 Apr 2017.
    3. Hsiao Chink Tang, 2014. "Exchange Rate Volatility and Intra-Asia Trade: Evidence by Type of Goods," The World Economy, Wiley Blackwell, vol. 37(2), pages 335-352, February.
    4. Bahmani-Oskooee, Mohsen & Aftab, Muhammad, 2017. "On the asymmetric effects of exchange rate volatility on trade flows: New evidence from US-Malaysia trade at the industry level," Economic Modelling, Elsevier, vol. 63(C), pages 86-103.
    5. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah, 2011. "Exchange-rate volatility and industry trade between the U.S. and Malaysia," Research in International Business and Finance, Elsevier, vol. 25(2), pages 127-155, June.
    6. Hasanov Akram, 2011. "Exchange rate risk and trade flows: the case of Belarus, Kazakhstan, Russia, and Ukraine," EERC Working Paper Series 11/09e, EERC Research Network, Russia and CIS.
    7. Mohsen Bahmani-Oskooee & Yongqing Wang, 2008. "Impact Of Exchange Rate Uncertainty On Commodity Trade Between The Us And Australia ," Australian Economic Papers, Wiley Blackwell, vol. 47(3), pages 235-258, September.
    8. Basher A. Balg & Hugh Metcalf, 2010. "Modeling Exchange Rate Volatility," Review of International Economics, Wiley Blackwell, vol. 18(1), pages 109-120, February.
    9. Muhammad Aftab & Karim Bux Shah Syed & Rubi Ahmad & Izlin Ismail, 2016. "Exchange-rate variability and industry trade flows between Malaysia and Japan," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(4), pages 453-478, June.
    10. Njindan Iyke, Bernard & Ho, Sin-Yu, 2017. "Exchange Rate Uncertainty and Domestic Investment in Ghana," MPRA Paper 80474, University Library of Munich, Germany.
    11. Njindan Iyke, Bernard & Ho, Sin-Yu, 2017. "Real Exchange Rate Volatility and Domestic Consumption in Ghana," MPRA Paper 78852, University Library of Munich, Germany.
    12. Mabeta, Joshua, 2015. "Determinants of Non-Traditional Agricultural Exports Growth in Zambia: A Case of Cotton and Tobacco," Research Theses 243450, Collaborative Masters Program in Agricultural and Applied Economics.
    13. Izatov, Asset, 2015. "The Role of Oil Prices, Real Effective Exchange Rate and Inflation in Economic Activity of Russia: An Empirical Investigation," MPRA Paper 70735, University Library of Munich, Germany, revised 2015.
    14. Mohsen Bahmani-Oskooee & Marina Kovyryalova, 2008. "Impact of Exchange Rate Uncertainty on Trade Flows: Evidence from Commodity Trade between the United States and the United Kingdom," The World Economy, Wiley Blackwell, vol. 31(8), pages 1097-1128, August.
    15. Abdorreza Soleymani & Soo Y. Chua, 2014. "Effect of exchange rate volatility on industry trade flows between Malaysia and China," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(5), pages 626-655, August.
    16. Mekbib Gebretsadik Haile & Geoff Pugh, 2013. "Does exchange rate volatility discourage international trade? A meta-regression analysis," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 22(3), pages 321-350, April.
    17. repec:ksp:journ2:v:4:y:2017:i:2:p:130-148 is not listed on IDEAS
    18. Huang, Alex YiHou & Peng, Sheng-Pen & Li, Fangjhy & Ke, Ching-Jie, 2011. "Volatility forecasting of exchange rate by quantile regression," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 591-606, October.
    19. Mohsen Bahmani-Oskooee and Hanafiah Harvey, 2017. "Exchange Rate Volatility and Its Impact on Commodity Trade Flows between Singapore and Malaysia," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 42(1), pages 17-33, March.
    20. Obeng, Camara Kwasi, 2017. "Effects of Exchange Rate Volatility on Non-Traditional Exports in Ghana," MPRA Paper 79026, University Library of Munich, Germany.
    21. Bahmani-Oskooee, Mohsen & Hegerty, Scott W., 2008. "Exchange-rate risk and U.S.-Japan trade: Evidence from industry level data," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 518-534, December.

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