The Impact Of G-3 Exchange Rate Volatility On Developing Countries
This paper describes G-3 exchange rate volatility and evaluates its impact on developing countries. The paper presents empirical evidence showing that G-3 exchange rate volatility has a robust and significantly negative impact on developing countries’ exports. A one percentage point increase in G-3 exchange rate volatility decreases real exports of developing countries by about 2 per cent, on average. G-3 exchange rate volatility also appears to have a negative influence on foreign direct investment to certain regions, and increases the probability of occurrence of exchange rate crises in developing countries. These results imply that greater stability in the international exchange rate system would help improve trade and foreign direct investment prospects for developing countries – and would help prevent currency crises.
|Date of creation:||2002|
|Contact details of provider:|| Postal: Palais des Nations, CH - 1211 Geneva 10|
Phone: +41 22 907 12 34
Fax: +41 22 907 00 43
Web page: http://www.unctad.org/Templates/Page.asp?intItemID=2101&lang=1
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kenen, Peter B & Rodrik, Dani, 1986. "Measuring and Analyzing the Effects of Short-term Volatility in Real Exchange Rates," The Review of Economics and Statistics, MIT Press, vol. 68(2), pages 311-315, May.
- Linda S. Goldberg & Michael W. Klein, 1996.
"Foreign direct investment, trade, and real exchange rate linkages in developing countries,"
Federal Reserve Bank of San Francisco, pages 73-100.
- Linda S. Goldberg & Michael W. Klein, 1997. "Foreign Direct Investment, Trade and Real Exchange Rate Linkages in Developing Countries," NBER Working Papers 6344, National Bureau of Economic Research, Inc.
- Esquivel, Gerardo & Larraín B, Felipe, 2000. "Determinantes de las crisis cambiarias," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(266), pages 191-237, abril-jun.
- Carmen M. Reinhart & Vincent Raymond Reinhart, 2002. "What Hurts Emerging Markets Most? G3 Exchange Rate or Interest Rate Volatility?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 133-170 National Bureau of Economic Research, Inc.
- Reinhart, Carmen & Reinhart, Vincent, 2000. "What does a G-3 target zone mean for emerging-market economies?," MPRA Paper 14099, University Library of Munich, Germany.
- Reinhart, Carmen & Reinhart, Vincent, 2002.
"Una banda cambiaria en el G–3 ¿Es lo mejor para los mercados emergentes?
[Is a G-3 Target Zone on Target for Emerging Markets?]," MPRA Paper 13694, University Library of Munich, Germany.
- Reinhart, Carmen & Reinhart, Vincent, 2001. "What hurts most?: G-3 exchange rate or interest rate volatility," MPRA Paper 14098, University Library of Munich, Germany.
- Reinhart, Carmen & Reinhart, Vincent, 2002. "Is a G-3 Target Zone on Target for Emerging Markets?," MPRA Paper 7581, University Library of Munich, Germany.
- Carmen M. Reinhart & Vincent R. Reinhart, 2001. "What Hurts Most? G-3 Exchange Rate or Interest Rate Volatility," NBER Working Papers 8535, National Bureau of Economic Research, Inc.
- Ronald I. McKinnon, 1999. "Euroland and East Asia in a Dollar-Based International Monetary System: Mundell Revisited," Working Papers 99020, Stanford University, Department of Economics.
- Chowdhury, Abdur R, 1993. "Does Exchange Rate Volatility Depress Trade Flows? Evidence from Error-Correction Models," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 700-706, November.
- Currie, David & Wren-Lewis, Simon, 1990. "Evaluating the Extended Target Zone Proposal for the G3," Economic Journal, Royal Economic Society, vol. 100(399), pages 105-123, March.
- Currie, David & Wren-Lewis, Simon, 1988. "Evaluating the Extended Target Zones Proposal for the G3," CEPR Discussion Papers 221, C.E.P.R. Discussion Papers.
- Brodsky, David A., 1984. "Fixed versus flexible exchange rates and the measurement of exchange rate instability," Journal of International Economics, Elsevier, vol. 16(3-4), pages 295-306, May.
- Giovanni Dell'Ariccia, 1999. "Exchange Rate Fluctuations and Trade Flows: Evidence from the European Union," IMF Staff Papers, Palgrave Macmillan, vol. 46(3), pages 1-5.
- Richard H. Clarida, 1999. "G3 Exchange Rate Relationships: A Recap of the Record and a Review of Proposals for Change," NBER Working Papers 7434, National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)