IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

Does International Trade Stabilize Exchange Rate Volatility?

  • Tseng, Hui-Kuan


    (Department of Economics, University of North Carolina at Charlotte)

Registered author(s):

    Ever since the early 1980s, major industrial countries have been suffering from severe multi-lateral trade imbalances, accompanied by tremendously volatile exchange rates. This paper examines the relationship between trade balance and exchange rate volatility. A stochastic macroeconomic model with sticky prices is developed. Our comparative statics and numerical simulation results indicate that an increased trade balance (relative to domestic aggregate demand) tends to reduce exchange rate volatility when the domestic absorption shock disturbs the economy. In the presence of all other domestic and foreign shocks, however, an increased trade balance tends to augment exchange-rate volatility, except for the case of a disturbance in domestic real income in which the effect of an increased trade balance is indeterminate. Our results suggest that whether trade imbalance has aggravated exchange rate volatility in many industrial countries is an open question, which needs to be solved through more empirical investigations.

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below under "Related research" whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Article provided by Camera di Commercio di Genova in its journal Economia Internazionale / International Economics.

    Volume (Year): 60 (2007)
    Issue (Month): 2 ()
    Pages: 231-246

    in new window

    Handle: RePEc:ris:ecoint:0061
    Contact details of provider: Postal: Via Garibaldi 4, 16124 Genova, Italy
    Phone: +39 010 27041
    Fax: +39 010 2704222
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ris:ecoint:0061. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Angela Procopio)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.