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Real Exchange Rate Volatility and U.S. Bilateral Trade: A VAR Approach

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  • Koray, Faik
  • Lastrapes, William D

Abstract

This paper uses VAR models to investigate the impact of real exchange rate volatility on U.S. bilateral imports from the United Kingdom, France, Germany, Japan and Canada. The VAR systems include U.S. and foreign macro variables, and are estimated separately for each country. The major results suggest that the effect of volatility on imports is weak, although permanent shocks to volatility do have a negative impact on this measure of trade, and those effects are relatively more important over the flexible rate period. Copyright 1989 by MIT Press.

Suggested Citation

  • Koray, Faik & Lastrapes, William D, 1989. "Real Exchange Rate Volatility and U.S. Bilateral Trade: A VAR Approach," The Review of Economics and Statistics, MIT Press, vol. 71(4), pages 708-712, November.
  • Handle: RePEc:tpr:restat:v:71:y:1989:i:4:p:708-12
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