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US Trade and Exchange Rate Volatility: A Real Sectoral Bilateral Analysis

Listed author(s):
  • Joseph P. Byrne
  • Julia Darby
  • Ronald MacDonald

In this paper we consider the impact of exchange rate volatility on the volume of bilateral US trade (both exports and imports) using sectoral data. Amongst the novelties in our approach are the use of sectoral industrial price indices, rather than an aggregate price index, and the construction of the sectoral groupings, which is based on economic and econometric criteria. We find that separating trade into differentiated goods and homogeneous goods results in the most appropriate sectoral division, and we also report evidence to suggest that exchange rate volatility has a robust and significantly negative effect across sectors, although it is strongest for exports of differentiated goods.

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File URL: http://www.gla.ac.uk/media/media_219102_en.pdf
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Paper provided by Business School - Economics, University of Glasgow in its series Working Papers with number 2006_9.

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Date of creation: Oct 2006
Handle: RePEc:gla:glaewp:2006_9
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