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Nonlinear effects of exchange rate volatility on the volume of bilateral exports

Author

Listed:
  • Christopher F. Baum

    (Department of Economics, Boston College, Chestnut Hill, MA 02467, USA)

  • Mustafa Caglayan

    (Department of Economics and Accounting, University of Liverpool, Liverpool, UK)

  • Neslihan Ozkan

    (Department of Economics and Accounting, University of Liverpool, Liverpool, UK)

Abstract

In this paper, we investigate empirically the impact of exchange rate volatility on real international trade flows utilizing a 13-country data set of monthly bilateral real exports for 1980-1998. We compute one-month-ahead exchange rate volatility from the intra-monthly variations in the exchange rate to better quantify this latent variable. We find that the effect of exchange rate volatility on trade flows is nonlinear, depending on its interaction with the importing country's volatility of economic activity, and that it varies considerably over the set of country pairs considered. Copyright © 2003 John Wiley & Sons, Ltd.

Suggested Citation

  • Christopher F. Baum & Mustafa Caglayan & Neslihan Ozkan, 2004. "Nonlinear effects of exchange rate volatility on the volume of bilateral exports," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(1), pages 1-23.
  • Handle: RePEc:jae:japmet:v:19:y:2004:i:1:p:1-23
    DOI: 10.1002/jae.725
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    More about this item

    JEL classification:

    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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