IDEAS home Printed from https://ideas.repec.org/p/zbw/kondp2/12.html
   My bibliography  Save this paper

Exchange rate volatility and international trade: The option approach

Author

Listed:
  • Franke, Günter

Abstract

Usually it is argued that an increase in exchange rate volatility reduces the volume of international trade since trading firms are risk averse. This paper shows for risk neutral firms that the expected international trade volume in standardized commodities grows with exchange rate volatility. The firms adjust their trade volume to the exchange rate level. The more favorable the exchange rate is, the higher is the export volume. If the rate drops below some level, exports are stopped. Thus international trading represents an option for firms. Its value increases with exchange rate volatility.

Suggested Citation

  • Franke, Günter, 1986. "Exchange rate volatility and international trade: The option approach," Discussion Papers, Series II 12, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  • Handle: RePEc:zbw:kondp2:12
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/101671/1/746299125.pdf
    Download Restriction: no

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Siebert, Horst, 1987. "Entwicklungstendenzen der Weltwirtschaft: Stilisierte Fakten und Ansätze zur Erklärung," Open Access Publications from Kiel Institute for the World Economy 1347, Kiel Institute for the World Economy (IfW).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:kondp2:12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - Leibniz Information Centre for Economics). General contact details of provider: http://edirc.repec.org/data/fwkonde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.