Exchange-rate sensitivity of commodity trade flows: Does the choice of reporting country affect the empirical estimates?

Mohsen Bahmani-Oskooee, Scott Hegerty and Hanafiah Harvey

The Journal of International Trade & Economic Development, 2013, vol. 22, issue 8, 1183-1213

Abstract: While the effects of currency fluctuations on trade have long been of interest to economic researchers, the most recent trend in the literature is to estimate commodity trade flows between pairs of countries. This raises an important question: Does it matter which country reports the data? This study investigates 96 industries that are reported both as exports by the United States and as imports by South Korea. Since export data are FOB and import data are CIF, the Korean imports are expectedly larger than the US exports. Correspondingly, our cointegration analysis produces drastically different results between specifications. Nonparametric analysis shows that the Korean imports are more sensitive to real exchange-rate fluctuations than US exports, signifying the importance of cost of insurance and freight, as well as the data's conversion into dollars.

Date: 2013
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DOI: 10.1080/09638199.2011.651154

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