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Asymmetric effect of extreme changes in the exchange rate volatility on the US imports

Author

Listed:
  • Bisharat Hussain Chang
  • Suresh Kumar Oad Rajput
  • Niaz Ahmed Bhutto
  • Zahida Abro

Abstract

Purpose - Recent literature has shifted to examining whether exchange rate volatility symmetrically or asymmetrically affects the trade flows. This study aims to extend the existing literature by examining the effects of extremely large to extremely small changes in exchange rate volatility series on the US imports from Brazil, India, Mexico and South Africa. Design/methodology/approach - For examining the effects of extreme changes, multiple threshold nonlinear autoregressive distributed lag (MTNARDL) model is used and the exchange rate volatility series is divided into quintiles and deciles. It helps to examine the effects of each quintile/decile of exchange rate volatility series on the US imports. Findings - Findings indicate that the effects of extremely large changes in the exchange rate volatility series significantly differ from the effects of extremely small changes in the exchange rate volatility series on the US imports. Practical implications - The findings of this study are very important. These findings help to consider the effect of extreme changes before devising policies related to trade flows. Originality/value - This study mainly focuses on US imports from Brazil, India, Mexico and South Africa. In addition, this study extends the existing literature by using a novel methodology called MTNARDL model.

Suggested Citation

  • Bisharat Hussain Chang & Suresh Kumar Oad Rajput & Niaz Ahmed Bhutto & Zahida Abro, 2020. "Asymmetric effect of extreme changes in the exchange rate volatility on the US imports," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 37(2), pages 293-309, May.
    • Handle: RePEc:eme:sefpps:sef-03-2019-0122
    DOI: 10.1108/SEF-03-2019-0122
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    Citations

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    Cited by:

    1. Hashmi, Shabir Mohsin & Chang, Bisharat Hussain & Huang, Liangfang & Uche, Emmanuel, 2022. "Revisiting the relationship between oil prices, exchange rate, and stock prices: An application of quantile ARDL model," Resources Policy, Elsevier, vol. 75(C).
    2. Hashmi, Shabir Mohsin & Chang, Bisharat Hussain & Rong, Li, 2021. "Asymmetric effect of COVID-19 pandemic on E7 stock indices: Evidence from quantile-on-quantile regression approach," Research in International Business and Finance, Elsevier, vol. 58(C).
    3. Hashmi, Shabir Mohsin & Chang, Bisharat Hussain & Bhutto, Niaz Ahmed, 2021. "Asymmetric effect of oil prices on stock market prices: New evidence from oil-exporting and oil-importing countries," Resources Policy, Elsevier, vol. 70(C).
    4. Iulia Iuga, 2020. "The Influence of The Exchange Rate on Imports – Romanian Case Study," Ovidius University Annals, Economic Sciences Series, Ovidius University of Constantza, Faculty of Economic Sciences, vol. 0(1), pages 975-982, August.

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