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Real & nominal foreign exchange volatility effects on exports – the importance of timing

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  • Donal Bredin
  • John Cotter

Abstract

This paper compares real and nominal foreign exchange volatility effects on exports. Using a flexible lag version of the Goldstein-Khan two-country imperfect substitutes model for bilateral trade, we identify the overall effect into both a timing as well as a size impact. We find that the size impact of forecasted foreign exchange volatility does not vary according to the measure used in terms of magnitude and direction. However, there are very different timing effects, when we compare real and nominal foreign exchange rate volatility.

Suggested Citation

  • Donal Bredin & John Cotter, 2006. "Real & nominal foreign exchange volatility effects on exports – the importance of timing," Centre for Financial Markets Working Papers 10197/1177, Research Repository, University College Dublin.
    • Handle: RePEc:rru:cfmwps:10197/1177
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    File URL: http://hdl.handle.net/10197/1177
    File Function: First version, 2006
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    Keywords

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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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