Trade flows, exchange rate uncertainty and financial depth: evidence from 28 emerging countries

Firat Demir, Mustafa Caglayan () and Omar S. Dahi

MPRA Paper from University Library of Munich, Germany

Abstract: This paper investigates the effects of real exchange rate uncertainty on manufactures exports from 28 emerging economies, representing 82\% of all developing country manufactures exports, and explores the sources of heterogeneity in the uncertainty effects by controlling for the direction of trade (South-North or South-South), and the level of financial development of the exporting country. The empirical results show that for more than half of the countries the uncertainty effect is unidirectional, either South-South or South-North, and the median impact is negative. In addition, while we find that financial development augments trade, exchange rate shocks can negate this effect. Last but not the least, trade among developing economies improves export growth under exchange rate shocks.

Keywords: Trade flows; Exchange rate uncertainty; South-South trade; Financial depth; Manufactured goods trade; Dynamic panel data (search for similar items in EconPapers)
JEL-codes: E44 F15 F31 G15 O14 (search for similar items in EconPapers)
Date: 2012-01-01
New Economics Papers: this item is included in nep-int and nep-opm
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https://mpra.ub.uni-muenchen.de/37400/1/MPRA_paper_37400.pdf original version (application/pdf)

Related works:
Journal Article: Trade Flows, Exchange Rate Uncertainty, and Financial Depth: Evidence from 28 Emerging Countries (2013)
Working Paper: Trade Flows, Exchange Rate Uncertainty and Financial Depth: Evidence from 28 Emerging Countries (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:37400

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