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On the Asymmetric Effects of Exchange Rate Volatility on Trade Flows: Evidence from Africa

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  • Mohsen Bahmani-Oskooee
  • Augustine C. Arize

Abstract

A glance through the literature on the effects of exchange rate uncertainty on the trade flows reveals that African countries have received the least attention. We consider the response of exports and imports of 13 African nations to a Generalized Autoregressive Conditional Heteroskedasticity (GARCH)-based measure of exchange rate uncertainty. Like previous research, when we used linear models in which the effects are assumed to be symmetric, we found significant long-run effects in almost one-third of the countries in our sample. However, when we shifted to nonlinear export and import demand models, we found significant long-run effects of exchange rate uncertainty on trade flows of almost all countries. These effects were asymmetric in nature.

Suggested Citation

  • Mohsen Bahmani-Oskooee & Augustine C. Arize, 2020. "On the Asymmetric Effects of Exchange Rate Volatility on Trade Flows: Evidence from Africa," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 56(4), pages 913-939, March.
    • Handle: RePEc:mes:emfitr:v:56:y:2020:i:4:p:913-939
    DOI: 10.1080/1540496X.2018.1543582
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    4. Adewuyi, Adeolu & Ogebe, Joseph O. & Oshota, Sebil, 2021. "The role of exchange rate and relative import price on sawnwood import demand in Africa: Evidence from modified heterogeneous panel data methods," The Journal of Economic Asymmetries, Elsevier, vol. 24(C).
    5. S. M. Woahid Murad, 2021. "Asymmetric Effects of Economic Uncertainty on Money Demand Function in Bangladesh: A Nonlinear ARDL and Cumulative Fourier Causality Approach," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 20(2), pages 1-13, September.
    6. S. M. Woahid Murad, 2021. "Asymmetric Effects of Economic Uncertainty on Money Demand Function in Bangladesh: A Nonlinear ARDL and Cumulative Fourier Causality Approach," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 20(2), pages 187-199, September.
    7. Xu, Jia & Bahmani-Oskooee, Mohsen & Karamelikli, Huseyin, 2022. "On the asymmetric effects of exchange rate uncertainty on China’s bilateral trade with its major partners," Economic Analysis and Policy, Elsevier, vol. 73(C), pages 653-669.
    8. Lee, Chien-Hui & Li, Shu-Hui & Lee, Jen-Yu, 2022. "An asymmetric impact analysis of the exchange rate volatility on commodity trade between the U.S. and China," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 399-415.
    9. James Temitope Dada, 2020. "Asymmetric effect of exchange rate volatility on trade in sub-Saharan African countries," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 37(2), pages 149-162, July.
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