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The effect of exchange rate uncertainty on US imports from the UK: Consistent OLS estimation with volatility measured by an ARCH-type model

Jan Podivinsky (), Chongcheul Cheong and Maozu Lu

No 657, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: This paper investigates the effect of exchange rate volatility on US-UK bilateral trade flows. As part of econometric problems arising from a generated variable, we consider a special case when an ARCH type auxiliary model is used to measure uncertainty in the exchange rate and discuss a procedure for the correct inference of the OLS estimates of the primary equation in the second stage, which includes the generated variable. By applying this two-step approach, we find a statistically significant, negative impact of exchange rate uncertainty on US imports from the United Kingdom

Keywords: ARCH model; Consistent OLS estimation; Generated regressors (search for similar items in EconPapers)
JEL-codes: C22 C51 F14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn
Date: 2004-08-11
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http://repec.org/esFEAM04/up.14507.1080659464.pdf (application/pdf)

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Working Paper: The Effect of Exchange Rate Uncertainty on US Imports from the UK: Consistent OLS Estimation with Volatility Measured by An ARCH-type Model (2004) Downloads
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