The Effect of Exchange Rate Uncertainty on US Imports from the UK: Consistent OLS Estimation with Volatility Measured by An ARCH-type Model

Jan Podivinsky (), Chongcheul Cheong and Maozu Lu

No 212, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: This paper investigates the effect of exchange rate volatility on US-UK bilateral trade flows. As part of econometric problems arising from a generated variable, we consider a special case when an ARCH type auxiliary model is used to measure uncertainty in the exchange rate and discuss a procedure for the correct inference of the OLS estimates of the primary equation in the second stage, which includes the generated variable. By applying this two-step approach, we find a statistically significant, negative impact of exchange rate uncertainty on US imports from the United Kin

Keywords: ARCH model; Consistent estimation; Generated regressors; Volatility (search for similar items in EconPapers)
JEL-codes: C22 C51 F14 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-ecm, nep-ets, nep-fin and nep-ifn
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Working Paper: The effect of exchange rate uncertainty on US imports from the UK: Consistent OLS estimation with volatility measured by an ARCH-type model (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:ausm04:212

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