Does exchange rate risk affect exports asymmetrically? Asian evidence

WenShwo Fang, YiHao Lai and Stephen Miller

Journal of International Money and Finance, 2009, vol. 28, issue 2, 215-239

Abstract: 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, which may reflect exporter's asymmetric risk perception and hedging behavior. Using bilateral exports from eight Asian countries to the US, the real exchange rate risk significantly affects exports for all countries, negative or positive, in periods of depreciation or appreciation. Thus, policy makers can consider the stability of the exchange rate in addition to its depreciation as a method of controlling export growth.

Keywords: Exports; Exchange; rate; risk; Asymmetric; hedging; DCC; bivariate; GARCH-M; model (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (29)

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Working Paper: Does Exchange Rate Risk Affect Exports Asymmetrically? Asian Evidence (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:28:y:2009:i:2:p:215-239

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