Does exchange-rate volatility affect import flows in G-7 Countries? Evidence from cointegration models

A. C. Arize and S. S. Shwiff

Applied Economics, 1998, vol. 30, issue 10, 1269-1276

Abstract: This paper provides new evidence on the long-run relationship between imports and exchange-rate volatility in G-7 countries. The period examined is 1973:2 through 1995:1. Cointegration analyses are based on Johansen's (1991, 1994) approach and robust single-equation methods of Stock and Watson (1993) and Phillips and Loretan (1991). In conformity with theoretical considerations, the results indicate that exchange-rate volatility has a significant negative effect on the volume of imports of most G-7 countries whereas for Canada, it is positive and significant. These findings are reasonably robust in terms of measures of exchange-rate volatility and different estimation methods.

Date: 1998
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DOI: 10.1080/000368498324887

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