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Exchange rate volatility and Irish-UK trade, 1979-1992

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  • Eleanor Doyle

Abstract

This study examines how exchange-rate volatility affected Ireland's exports to its most important trading partner, the United Kingdom, from 1979 to 1992. To ensure reliable inferences regarding income and price elasticities and the impact of exchange rate volatility on exports, the time series properties of the series used are investigated. The analysis here is conducted at both aggregate and 2-digit SITC Division levels since exchange rate volatility can reasonably be presumed to affect sectors differently. Since expectations matter for exchange rate determination real volatility was generated according to a first-order GARCH process. Both real and nominal volatility were important determinants for over 35% of Irish-UK trade, with positive effects predominating. This may be due to the nature of Irish firms operating in a small open economy where they have little option in dealing with increased exchange rate risk except to 'weather the storm' for fear of losing market share or facing costs of either exit, re-entry, or both.

Suggested Citation

  • Eleanor Doyle, 2001. "Exchange rate volatility and Irish-UK trade, 1979-1992," Applied Economics, Taylor & Francis Journals, vol. 33(2), pages 249-265.
  • Handle: RePEc:taf:applec:v:33:y:2001:i:2:p:249-265
    DOI: 10.1080/00036840122999
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    References listed on IDEAS

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    Cited by:

    1. Mohsen Bahmani-Oskooee & Dan Xi, 2014. "Economic Uncertainty, Monetary Uncertainty, and the Demand for Money: Evidence From Asian Countries," Australian Economic Papers, Wiley Blackwell, vol. 53(1-2), pages 16-28, June.
    2. Hasanov Akram, 2011. "Exchange rate risk and trade flows: the case of Belarus, Kazakhstan, Russia, and Ukraine," EERC Working Paper Series 11/09e, EERC Research Network, Russia and CIS.
    3. Mohsen Bahmani-Oskooee & Yongqing Wang, 2008. "Impact Of Exchange Rate Uncertainty On Commodity Trade Between The Us And Australia ," Australian Economic Papers, Wiley Blackwell, vol. 47(3), pages 235-258, September.
    4. Bouoiyour, Jamal & Selmi, Refk, 2013. "Exchange rate uncertainty and export performance: what meta-analysis reveals?," MPRA Paper 49249, University Library of Munich, Germany, revised Aug 2013.
    5. Marilyne Huchet-Bourdon & Jane Korinek, 2011. "To What Extent Do Exchange Rates and their Volatility Affect Trade?," OECD Trade Policy Papers 119, OECD Publishing.
    6. Nishimura, Yusaku & Hirayama, Kenjiro, 2013. "Does exchange rate volatility deter Japan-China trade? Evidence from pre- and post-exchange rate reform in China," Japan and the World Economy, Elsevier, vol. 25, pages 90-101.
    7. repec:ddj:fseeai:y:2018:i:1:p:5-14 is not listed on IDEAS
    8. Myint Moe Chit & Marian Rizov & Dirk Willenbockel, 2010. "Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies," The World Economy, Wiley Blackwell, vol. 33(2), pages 239-263, February.
    9. Goudarzi, Mostafa & Khanarinejad, Komeil & Ardakani, Zahra, 2012. "Investigation the Role of Exchange Rate Volatility on Iran's Agricultural Exports (Case Study: Date, Pistachio and Saffron)," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 4(1), March.
    10. Mwinlaaru, Peter Yeltulme & Ofori, Isaac Kwesi, 2017. "Real exchange rate and economic growth in Ghana," MPRA Paper 82405, University Library of Munich, Germany.
    11. Oshinloye, Micheal & Onanuga, Olaronke & Onanuga, Abayomi, 2015. "Exchange Rate Behaviour in the West Africa Monetary Zone: A GARCH Approach," MPRA Paper 83324, University Library of Munich, Germany.
    12. Mohsen Bahmani-Oskooee & Marina Kovyryalova, 2008. "Impact of Exchange Rate Uncertainty on Trade Flows: Evidence from Commodity Trade between the United States and the United Kingdom," The World Economy, Wiley Blackwell, vol. 31(8), pages 1097-1128, August.
    13. Jonathan M. Chipili, 2013. "Exchange Rate Volatility and Trade Flows in Zambia," African Development Review, African Development Bank, vol. 25(1), pages 55-66, March.
    14. Dimitrios Serenis & Paul Serenis, 2010. "Exchange Rate Volatility, the E.U. and Sectoral Exports: New Empirical Evidence from the Chemical Sector (1973-2005)," Research in World Economy, Research in World Economy, Sciedu Press, vol. 1(1), pages 47-55, November.
    15. Bouoiyour, Jamal & Selmi, Refk, 2015. "A synthesis of the effects of exchange rate uncertainty on international trade via Meta-Regression analysis," MPRA Paper 65737, University Library of Munich, Germany.
    16. repec:ibf:ijbfre:v:11:y:2017:i:2:p:23-38 is not listed on IDEAS
    17. Bouoiyour, Jamal & Selmi, Refk, 2014. "How Does Exchange Rate Uncertainty interact with International Trade? A Meta-Analysis Revisited," MPRA Paper 56201, University Library of Munich, Germany.

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