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Exchange Rate Effects on the Volume and Variability of Trade Flows

Author

Listed:
  • Caglayan, M.
  • Baum, C.F.
  • Barkoulas, J.T.

Abstract

This paper investigates the effects of exchange rate uncertainty on the volume and variability of trade flows. Employing a signal extraction framework, we show that the direction and magnitude of importers' and exporters' optimal trading activities depend upon the source of the uncertainty (general economic shocks, fundamental factors driving the exchange rate process, or noise in the signal of policy innovations), providing a rationale for the contradictory empirical evidence in the literature.

Suggested Citation

  • Caglayan, M. & Baum, C.F. & Barkoulas, J.T., 1998. "Exchange Rate Effects on the Volume and Variability of Trade Flows," Papers 1998/05, Koc University.
    • Handle: RePEc:fth:kocuni:1998/05
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    References listed on IDEAS

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    More about this item

    Keywords

    EXCHANGE RATE ; TRADE;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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