EXCHANGE RATE VOLATILITY, AND SECTORAL EXPORTS IS THERE A RELATIONSHIP? NEW EVIDENCE FROM THE EU (original) (raw)
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Exchange Rate Volatility and Trade: External Exchange Rate Volatility Matters
Journal of International Commerce, Economics and Policy, 2020
We investigate the role of external exchange rate volatility in export in addition to the effect of bilateral exchange rate volatility using country-, sector-, and destination-specific detailed export data of the World Bank Exporter Dynamics Database. The results show that while the bilateral exchange rate volatility has a depressing effect on export, the external exchange rate volatility generates trade-promoting effect on export. However, the magnitude of the effect depends on trade intensity between countries. Furthermore, while the role of external exchange rate volatility diminished after the Global Financial Crisis, the effect of its volatility has become larger. Finally, external exchange rate volatility has a larger trade-promoting effect on export in the presence of high volatilities than the effect in the presence of low volatilities.
Review of International Economics, 2001
This study uses a large panel of industrialized and developing countries to investigate the link between exchange rate volatility and exports. Although the empirical literature on this relationship is extensive, a clear consensus about its nature and importance is yet to emerge. Using fixed-and random-effects models to capture cross-country differences, pooled export equations are estimated for the entire panel and various subsets of countries. The results, which are robust across different volatility measures, indicate that negative effects exist for LDC exports, especially from Latin America and Africa, but not for exports from Asian LDCs or industrialized countries. . We would like to thank King Banaian, Volker Clausen, and two anonymous referees for their insightful comments and suggestions. We also wish to acknowledge Pingo Wang for preparing the substantial database and Lou Ann Lora-Platt for editorial assistance. Any remaining errors or omissions are our responsibility.
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This paper surveys literature that investigates the effects of exchange rate uncertainty on international trade. We perform meta-regression analysis on 41 studies with 807 estimates. We show that the empirical works exhibit substantial publication selection and show a significant genuine exchange rate volatility effect on trade flows after correction of publication bias. In addition, the literature reveals a pronounced heterogeneity with respect to model specifications, samples, time horizons, and countries characteristics. The results appear robust among the different estimators and to the inclusion of dummies for the type of research outlet and publication year. These findings are supported by separate assessment of primary studies with, respectively, total exports and sectoral exports as the dependent variable. In comparison with the sectoral exports literature, the total exports literature seems more homogenous and its identified exchange rate volatility effect on trade is less conditional. In general, our most important advice for policy makers is that economic research does not reveal a single representative effect size.
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2007
We present an empirical investigation of a recently suggested but untested proposition that exchange rate volatility can have an impact on both the volume and variability of trade flows, considering a broad set of countries' bilateral real trade flows over the period 1980-1998. We generate proxies for the volatility of real trade flows and real exchange rates after carefully scrutinizing these variables' time series properties. Similar to the findings of earlier theoretical and empirical research, our first set of results show that the impact of exchange rate uncertainty on trade flows is indeterminate. Our second set of results provide new and novel findings that exchange rate volatility has a consistent positive and significant effect on the volatility of bilateral trade flows. JEL: F17, F31, C22.
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RePEc: Research Papers in Economics, 2006
We present an empirical investigation of a recently suggested but untested proposition that exchange rate volatility can have an impact on both the volume and variability of trade flows, considering a broad set of countries' bilateral real trade flows over the period 1980-1998. We generate proxies for the volatility of real trade flows and real exchange rates after carefully scrutinizing these variables' time series properties. Similar to the findings of earlier theoretical and empirical research, our first set of results show that the impact of exchange rate uncertainty on trade flows is indeterminate. Our second set of results provide new and novel findings that exchange rate volatility has a consistent positive and significant effect on the volatility of bilateral trade flows. JEL: F17, F31, C22.
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The exchange rate plays an important role in a country’s export performance and currency volatility has impact on international trade, the balance of payments and economic performance, however, views on the impact of exchange rate volatility on international trade flows are inconsistent, thus it is necessary to examine this matter further, and with knowledge of the application to small open economies. This paper analyzes impact of exchange rate volatility on the export performance of Central and Eastern European countries. Using monthly time series data, the empirical analyses has been carried out for the period 01/1999 to 03/2013. Volatility’s impact on export performance is estimated on bilateral export flows of Czech Republic, Slovakia, Hungary and Poland to euro area. For the volatility measurement, G/ARCH models are used. Autoregressive distributed lag and error-correction approach are used to examine the impact of exchange rate volatility on the exports. The results suggest no...
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After the collapse of Bretton-Woods system in 1973, many countries adopted the floating exchange rate regime. This situation led to fluctation and uncertainties in the exchange rates. There are number of studies that analyze the effect of Exchange rate volatility on trade flows but previous studies cannot obtain results about sectoral base due to the lack of disaggregated data sets. This study investigates the effects of exchange rate volatility on trade flows in Turkey. For this purpose using annual data covers the period 2002-2013. Exports to 15 European countries and imports from 15 European countries are analyzed by panel methodology. According to the test results, export sectors are negatively affected; import sectors are both positively and negatively affected from exchange rate volatility.