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On Trade Impact of Exchange Rate Volatility and Institutional Quality: The Case of Central European Countries

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  • Ferto, Imre
  • Fogarasi, Jozsef

Abstract

This paper explores the effect of exchange rate volatility and of the institutional quality on international trade flows of transition economies in Central European Countries by applying a gravity model of balance panel between 1999 and 2008. The results show that nominal exchange rate volatility has had a significant negative effect on trade by applying Psuedo- Maximum-Likelihood (PML) estimator method over this period. The institutional quality need to be improved in case of size of government and the quality of regulation. The negative effect of exchange rate volatility on agricultural exports suggests that joining Central European Countries to the euro zone can reduce the negative effects of exchange rate volatility on trade.

Suggested Citation

  • Ferto, Imre & Fogarasi, Jozsef, 2011. "On Trade Impact of Exchange Rate Volatility and Institutional Quality: The Case of Central European Countries," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114351, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae11:114351
    DOI: 10.22004/ag.econ.114351
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    Cited by:

    1. Carmen Sandu & Nicolae Ghiba, 2011. "The Relationship Between Exchange Rate And Exports In Romania Using A Vector Autoregressive Model," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 2(13), pages 1-29.
    2. Jana Šimáková & Daniel Stavárek, 2015. "The Effect of the Exchange Rate on Industry-Level Trade Flows in Czechia," Working Papers 0001, Silesian University, School of Business Administration.

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    More about this item

    Keywords

    International Relations/Trade;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • P29 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Other

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