Does Real Exchange Rate Volatility Affect Sectoral Trade Flows?

Mustafa Caglayan () and Jing Di
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Jing Di: Department of Economics, The University of Sheffield

No 2008011, Working Papers from The University of Sheffield, Department of Economics

Abstract: This paper investigates empirically the effect of real exchange rate volatility on sectoral bilateral trade flows between the US and her top thirteen trading countries. Our investigation also considers those effects on trade flows which may arise through changes in income volatility and the interaction between income and exchange rate volatilities. We provide evidence that exchange rate volatility mainly affects sectoral trade flows of developing but not that of developed countries. We also find that the effect of the interaction term on trade flows is opposite that of exchange rate volatility yet there is little impact arising from income volatility.

Keywords: exchange rates; volatility; trade flows. (search for similar items in EconPapers)
JEL-codes: C22 F17 F31 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2008-09, Revised 2008-09
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-opm
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Citations: View citations in EconPapers (5)

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