Exchange Rate Fluctuations and Trade Flows: Evidence from the European Union

Giovanni Dell'ariccia

IMF Staff Papers, 1999, vol. 46, issue 3, 5

Abstract: This paper analyzes the effects of exchange rate volatility on bilateral trade flows. Through use of a gravity model and panel data from western Europe, exchange rate uncertainty is found to have a negative effect on international trade. The results seem to be robust with respect to the particular measures representing exchange rate uncertainty. Particular attention is reserved for problems of simultaneous causality, stemming from the endogenous behavior of monetary authorities. The negative correlation between trade and bilateral volatility remains significant after controlling for the simultaneity bias. Copyright 1999, International Monetary Fund

JEL-codes: F14 F17 F31 (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (32)

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Working Paper: Exchange Rate Fluctuations and Trade Flows: Evidence From the European Union (1998)
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