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Exchange Rate Volatility and Export Margins

Author

Listed:
  • Roberto Álvarez
  • Michael Doyle
  • Ricardo A. López

Abstract

This paper examines the effect of real exchange rate volatility on the intensive margin and the extensive margin of exports. Using highly disaggregated U.S. import data by product and country of origin, and a methodology that takes into account the possible endogeneity of volatility to trade, this paper finds that exchange rate volatility hinders trade by reducing the number of goods exported by countries. This result suggests that exchange rate volatility can make countries more dependent on a narrower set of export goods, particularly in developing economies with export concentration. Policy makers should take this effect into account when deciding their exchange rate regimes.

Suggested Citation

  • Roberto Álvarez & Michael Doyle & Ricardo A. López, 2009. "Exchange Rate Volatility and Export Margins," Working Papers Central Bank of Chile 539, Central Bank of Chile.
  • Handle: RePEc:chb:bcchwp:539
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    File URL: http://si2.bcentral.cl/public/pdf/documentos-trabajo/pdf/dtbc539.pdf
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    Cited by:

    1. Obeng, Camara Kwasi, 2017. "Is the effect of exchange rate volatility on export diversification symmetric or asymmetric? Evidence from Ghana," MPRA Paper 79027, University Library of Munich, Germany.

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