Exchange rate volatility in Latin American and the Caribbean region: Evidence from 1985 to 2005

Radhames Lizardo

Journal of International Trade & Economic Development, 2009, vol. 18, issue 2, pages 255-273

Abstract: Using a total of 28 Latin American and Caribbean countries, this study finds a negative relationship between trade and exchange rate volatility. The econometric tool for this specific analysis is the widely used gravity model, in a panel data context. A similar condition is detected between inbound foreign direct investment and exchange rate volatility. The results of the study support the hypothesis that significant exchange rate volatility has a negative impact on the economies of the region and that achieving exchange rate stability should be a goal of policy makers in the context of Latin America and the Caribbean.

Keywords: economic growth; gravity model; real exchange rate volatility; foreign direct investment (search for similar items in EconPapers)
Date: 2009

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Persistent link: http://EconPapers.repec.org/RePEc:taf:jitecd:v:18:y:2009:i:2:p:255-273

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