The Volatility of International Trade Flows and Exchange Rate Uncertainty

Christopher Baum and Mustafa Caglayan ()

No 695, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: Empirical evidence obtained from data covering Eurozone countries, other industrialized countries, and newly industrialized countries (NICs) over 1980–2006 shows that exchange rate uncertainty has a consistent positive and significant effect on the volatility of bilateral trade flows. A one standard deviation increase in exchange rate uncertainty leads to an eight per cent increase in trade volatility. These effects differ markedly for trade flows between industrialized countries and NICs, and are not mitigated by the presence of the Eurozone. Contrary to earlier findings, our results also suggest that exchange rate uncertainty does not affect the volume of trade flows of either industrialized countries or NICs.

Keywords: exchange rates; uncertainty; volatility; trade flows; industrialized countries; Eurozone; newly industrialized countries (search for similar items in EconPapers)
JEL-codes: C22 F17 F31 (search for similar items in EconPapers)
Date: 2008-11-27
New Economics Papers: this item is included in nep-cba, nep-int and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://fmwww.bc.edu/EC-P/wp695.pdf main text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:695

Access Statistics for this paper

More papers in Boston College Working Papers in Economics from Boston College Department of Economics Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F Baum ().