 The Impact of Exchange Rate Volatility on World and Intra-trade Flows of SAARC CountriesChee-Wooi Hooy and Chee-Keong Choong Indian Economic Review, 2010, vol. 45, issue 1, 67-86 Abstract: Does exchange rate volatility affect world and bilateral trade flows of SAARC countries? Based on conditional exchange rate volatility generated from an asymmetric exponential generalized autoregressive conditional heteroskedasticity (EGARCH) model, the results of the export demand function estimated by bounds testing approach revealed that there exists long-run steady state equilibrium among exports, income, price differential and exchange rate volatility in Bangladesh, India, Pakistan and Sri Lanka. Exchange rate volatility has a significant positive effect on real exports in most, but not all the South Asian countries. The study supports the hypothesis that exchange rate volatility imposes costs on risk-averse market participants and responds by favouring to trade at the margin. Hence, this induces intra-trade flows among South Asian countries. Keywords: Exports; Bound Test; Asymmetric Exchange Rate Volatility; EGARCH (search for similar items in EconPapers) There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:dse:indecr:0015 Ordering information: This journal article can be ordered from Access Statistics for this article Indian Economic Review is currently edited by Pami Dua (Editor) & Ram Singh (Associate Editor) and Sunil Kanwar More articles in Indian Economic Review from Department of Economics, Delhi School of Economics University of Delhi, Delhi 110 007. Contact information at EDIRC. |
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