Does Exchange Rate Risk Affect Exports Asymmetrically? Asian Evidence

WenShwo Fang, YiHao Lai and Stephen Miller
Additional contact information
YiHao Lai: Feng Chia University

No 2005-09, Working papers from University of Connecticut, Department of Economics

Abstract: The effects of exchange rate risk have interested researchers, since the collapse of fixed exchange rates. Little consensus exists, however, regarding its effect on exports. Previous studies implicitly assume symmetry. This paper tests the hypothesis of asymmetric effects of exchange rate risk with a dynamic conditional correlation bivariate GARCH(1,1)-M model. The asymmetry means that exchange rate risk (volatility) affects exports differently during appreciations and depreciations of the exchange rate. The data include bilateral exports from eight Asian countries to the US. The empirical results show that real exchange rate risk significantly affects exports for all countries, negative or positive, in periods of depreciation or appreciation. For five of the eight countries, the effects of exchange risk are asymmetric. Thus, policy makers can consider the stability of the exchange rate in addition to its depreciation as a method of stimulating export growth.

Keywords: depreciation; exchange rate risk; exports; bivariate GARCH-M model (search for similar items in EconPapers)
JEL-codes: C32 F14 F31 F41 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2005-03
New Economics Papers: this item is included in nep-cfn, nep-fmk, nep-ifn and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Forthcoming in Journal of International Money and Finance

Downloads: (external link)
https://media.economics.uconn.edu/working/2005-09.pdf Full text (application/pdf)

Related works:
Journal Article: Does exchange rate risk affect exports asymmetrically? Asian evidence (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2005-09

Access Statistics for this paper

More papers in Working papers from University of Connecticut, Department of Economics University of Connecticut 365 Fairfield Way, Unit 1063 Storrs, CT 06269-1063. Contact information at EDIRC.
Bibliographic data for series maintained by Mark McConnel ().