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The Effect of Real Exchange Rate Volatility on Bilateral Sector Exports

Author

Listed:
  • Tammy A. Rapp

    (University of Louisiana at Monroe)

  • Nallapu N. Reddy

    (University of Michigan-Flint)

Abstract

This paper, utilizing cointegration and error correction models, examines the long run and short run impacts of exchange rate volatility on United States sector exports to Canada, France, Germany, Italy, Japan, and the United Kingdom. A long run cointegrating vector was found to exist for the majority of the sectors in all countries. However, there was not a consistent finding as to whether this relation was positive or negative. This, therefore, signifies the importance and relevance of investigating export trade by sectors rather than in aggregate since different sectors react differently to exchange rate volatility. The short run models provide evidence of the relevance of the long run equilibrating factor of the error correction term. However, only in a limited number of cases is exchange rate volatility causing trade in the Granger sense through lagged values.

Suggested Citation

  • Tammy A. Rapp & Nallapu N. Reddy, 2000. "The Effect of Real Exchange Rate Volatility on Bilateral Sector Exports," Journal of Economic Insight, Missouri Valley Economic Association, vol. 26(1), pages 87-104.
    • Handle: RePEc:mve:journl:v:26:y:2000:i:1:p:87-104
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    Citations

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    Cited by:

    1. Mohsen Bahmani-Oskooee & Hanafiah Harvey & Scott Hegerty, 2013. "Exchange-rate variability and U.S.-French trade flows: evidence from industry data," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(4), pages 685-719, November.
    2. Giovanni Tria & Giuseppe Galloppo, 2010. "How Does National Foreign Trade React To The European Central Bank’S Policy?," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 4(2), pages 137-151.
    3. Mohsen Bahmani‐Oskooee & Hanafiah Harvey, 2021. "Are the effects of exchange‐rate volatility on commodity trade between the U.S. and Mexico symmetric or asymmetric?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2998-3027, April.
    4. 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.

    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F30 - International Economics - - International Finance - - - General

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