The Effects of Real Exchange Rate Volatility on Sectoral Investment (original) (raw)
Related papers
The aim of this paper is to analyze empirically the effects of real exchange rate volatility on sectoral export flows in Turkey under intermediate and flexible exchange rate regimes. The cointegration analysis and error correction models are used to test long-run relationship and short-run effects respectively. It is expected that the using of sectoral level rather than aggregate data may disentangle the relationship between real exchange rate volatility and export flows. The empirical results show that real exchange rate volatility has negative and statistically significant effects on sectoral exports flows in both intermediate and flexible exchange rate regimes. These empirical results are consistent with the theory. However, the impact of real exchange rate and foreign income appears to be quite different for the two exchange rate regimes. While real exchange rate and foreign income coefficients are positive and significant under intermediate exchange rate regime, they are negatively significant or insignificant under flexible exchange rate regime contrary to the expected. Further research is required to analyse the impacts of real exchange rate and foreign income on sectoral exports. In this respect, one point may be the dependency of a particular sector on import in terms of intermediate goods and the second point may be the competitiveness of Turkey in a particular sector.
New Trends and Issues Proceedings on Humanities and Social Sciences, 2017
The aim of this paper is to analyse empirically the effects of real exchange rate volatility on sectoral exports in Turkey under intermediate and flexible exchange rate regimes. The cointegration test and error correction models are used to test the long-run relationship and short-run effects, respectively. The estimation results show that the real exchange rate volatility has negative and significant effects on sectoral exports in both intermediate and flexible exchange rate regimes. These empirical results are consistent with the theory. However, the impact of real exchange rate and foreign income appeared to be quite different for the two exchange rate regimes. Further, research is required to analyse the impacts of real exchange rate and foreign income on sectoral exports. Keywords: Real exchange rate volatility, real exchange rate, intermediate exchange rate regime, flexible exchange rate regime, sectoral export.
The Impact of Exchange Rate Volatility on Turkish Exports: 1993-2009
South East European Journal of Economics and Business, 2011
This paper attempts to investigate the long-run and short-run relationships between Turkish exports, exchange rate volatility, foreign income, and relative prices by employing quarterly data for the period 1993Q3-2009Q4. Towards this purpose, multivariate cointegration and error correction model (ECM) techniques are used in this study. The long-run estimation results suggest that foreign income and real exchange rate volatility exert positive and statistically significant impacts on Turkish exports, while relative prices affect Turkish exports negatively and significantly. In addition, the results of the ECM model indicate that relative prices have a negative and significant effect, foreign income has an insignificant effect, and nominal exchange rate volatility has a positive and significant effect on Turkish exports.
In this research, the relationship between real exchange rate volatility and foreign direct investment (FDI) is examined in theoretically and empirically by covering 1998Q1-2015Q4 period for Turkey. In the empirical modelling, FDI is explained with economic growth, exchange volatility and trade openness parallel with the existing literature. Moreover exchange rate volatility variable is computed by employing GARCH type model. The Bound Test approach which is proposed by Peseran et al. (2001) is employed in order to investigate the cointegration relationship between the variables. After we found cointegration, we analysed long and short term coefficients by using ARDL model. According to model’s results, growth and openness has positive and statistically significant effect on FDI, while volatility has negative effect on FDI as expected. However coefficient of volatility is statistically insignificant on FDI. Because of volatility coefficient is not statistically significiant, we can conclude that foreign investors take into consideration sustainable growth and openness for investing in Turkey instead of exchange rate volatility.
The Impact of Exchange Rate Volatility on Exports in Turkey
International Finance eJournal, 2012
This paper empirically investigates the impact of exchange rate volatility, export prices and weighed GDP of most of the trading partners of Turkey on aggregate exports for the period from 2003:2 to 2010:12. The primary focus is the impact of exchange rate volatility on exports from Turkey. To achieve this purpose, various approaches were employed previously. In line with the previous studies, the OLS regression method was employed. Appropriate tests to ensure the reliability of the analysis were undertaken. Time series data were used for the analysis. Cross correlation to determine the relationship between the pairs of variables was utilized. Our results indicated that there was a negative relationship between exports and volatility; however, this relationship was not significant at a level of 5%. Even though there were many studies exploring the impact of the volatility of the exchange rate on exports, there was no consensus for validation of the results among these various studie...
Panoeconomicus, 2015
This paper aims to investigate the effect of exchange-rate stability on real export volume in Turkey, using monthly data for the period February 2001 to January 2010. The Johansen multivariate cointegration method and the parsimonious error-correction model are applied to determine long-run and short-run relationships between real export volume and its determinants. In this study, the conditional variance of the GARCH (1, 1) model is taken as a proxy for exchange-rate stability, and generalized impulse-response functions and variance-decomposition analyses are applied to analyze the dynamic effects of variables on real export volume. The empirical findings suggest that exchangerate stability has a significant positive effect on real export volume, both in the short and the long run.
COINTEGRATION AND CAUSALITY AMONG EXCHANGE RATE, EXPORT, AND IMPORT: EMPIRICAL EVIDENCE FROM TURKEY
2007
This paper examines the cointegration and causality among exchange rate, export, and import for Turkey during the period of 1998-2006. The econometrics results show that there is a cointegration between exports and import, but direction of causality is bidirectional between these two variables. The impulse response functions also supports that there is a trade-off between exports and imports; for example, when imports are high, there is smaller exports at that time. This study supports few investigators who find no negative effect of exchange rate volatility on trade volume since it is found that exchange rates cannot determine the variation in exports and imports. JEL Classifications: F41, C3/C32 Vol.7-2 (2007) effect of exchange rate volatility on imports. Most of the studies have examined the effect of exchange rate volatility on exports and on trade volume.
Does Exchange Rate Volatility Really Influence Foreign Trade? Evidence from Turkey
We investigated the influence of exchange rate volatility on foreign trade for an emerging economy, namely Turkey, by using monthly data spanning from 1990 to 2015. We employed the Johansen cointegration test, the vector error correction model, or VECM, and the VAR Granger causality test within the framework of the Toda-Yamamoto procedure in order to capture both the long-term and short-term effects of exchange rate volatility. We report that there is a long-term relationship between exchange rate volatility and Turkish exports. In addition, while exchange rate volatility has a positive effect on Turkish exports in the long-term, this relationship disappears in the short-term.
THE IMPACT OF REAL EXCHANGE RATE VOLATILITY ON THE EXPORT OF TURKISH ELECTRICAL APPLIANCES
This paper examines the impact of real exchange rate volatility on the demand for electrical exports, which is the second largest sub-sector of machinery in Turkey, by employing multivariate cointegration and error correction methods. The model was estimated for two-digit electrical exports (SITC 77), using quarterly data for the period 1995-2010. Our estimation results suggest that real exchange rate exerts a negative and significant impact on electrical exports both in the long and short term, while its volatility has only a positive and significant impact in the long run. In addition, the results of the long-term export model indicate that foreign income also has a positive and significant impact on Turkish electrical exports.
THE RELATIONSHIP BETWEEN FOREIGN EXCHANGE RATE AND FOREIGN DIRECT INVESTMENT IN TURKEY
The link between exchange rate and FDI flows has been investigated by several empirical studies. Besides exchange rate level and exchange rate volatility, some of the studies have also considered the effects of exchange rate expectations in their analysis. This study tries to test the hypothesis that there exists a reciprocal relationship between FDI inflows in Turkey and the real exchange rate level. Time series data for the period from January, 2007 to January, 2015 were used to investigate the effect of real exchange rate on foreign direct investment in Turkey in a long run. For this purpose, we employed a bound test cointegration approach that is based on the Autoregressive Distributed Lag Model (ARDL). The results obtained from a long-term static analysis of estimated ARDL model revealed that there is a cointegration relationship between the exchange rate level and FDI inflows in Turkey. JEL codes: F31; F21