Exchange Rate Effects on the Volume and Variability of Trade Flows

Mustafa Caglayan (), Christopher Baum and John Barkoulas

Working Papers from Koc University

Abstract: This paper investigates the effects of exchange rate uncertainty on the volume and variability of trade flows. Employing a signal extraction framework, we show that the direction and magnitude of importers' and exporters' optimal trading activities depend upon the source of the uncertainty (general economic shocks, fundamental factors driving the exchange rate process, or noise in the signal of policy innovations), providing a rationale for the contradictory empirical evidence in the literature.

Keywords: EXCHANGE RATE; TRADE (search for similar items in EconPapers)
JEL-codes: F11 F17 (search for similar items in EconPapers)
Pages: 28 pages
Date: 1998
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Related works:
Journal Article: Exchange rate effects on the volume and variability of trade flows (2002)
Working Paper: Exchange Rate Effects on the Volume and Variability of Trade Flows (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:fth:kocuni:1998/05

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