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Exchange rate volatility and trade. The case of Ukraine

Author

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  • Olga Popova
  • Jörg Jablinski
  • T. Lukashenko

Abstract

This article demonstrates the assumptions of economic theory and its followers, the theories which stimulate research on the positive correlation between the success of the economy, its growth and the level of international trade. The empirical analysis of this paper examines the example of the exchange rate volatility and its influence on international trade on the basis of Ukraine. In the descriptive part of this study, which looks at the exchange rate volatility in Ukraine as a whole, the authors have aggregated the bilateral volatilities using trade shares as weights to obtain what is referred to as the “effective volatility” of the country’s exchange rates. It is summarized that the current situation in Ukraine is extremely difficult, and external financial support could alleviate the crisis. The time span used in the work includes the years from 1999 to 2014, with the help of which the authors have demonstrated the fluctuation and correlation between these two factors. From the graph it has been possible to make the conclusion that even if there was no significant visible correlation between trade and the exchange rate volatility, it does not mean that there is no relationship between these two factors, because there are a lot of factors which affect the level of trade.

Suggested Citation

  • Olga Popova & Jörg Jablinski & T. Lukashenko, 2016. "Exchange rate volatility and trade. The case of Ukraine," Research Papers in Economics and Finance, Poznań University of Economics and Business, vol. 1(1), pages 17-24, December.
    • Handle: RePEc:jbl:ref000:v:1:y:2016:i:1:id:29
    DOI: 10.18559/ref.2016.1.2
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    References listed on IDEAS

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    1. Isabel Grilo & Gert Koopman, 2006. "Productivity and Microeconomic Reforms: Strengthening EU Competitiveness," Journal of Industry, Competition and Trade, Springer, vol. 6(2), pages 67-84, June.
    2. Michael D. McKenzie, 1999. "The Impact of Exchange Rate Volatility on International Trade Flows," Journal of Economic Surveys, Wiley Blackwell, vol. 13(1), pages 71-106, February.
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