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The Effects of the Real Exchange Rate Volatility and Misalignments on Foreign Trade Flows in Uzbekistan

Ulugbek Olimov () and Nishanbay Sirajiddinov

MPRA Paper from University Library of Munich, Germany

Abstract: This study documents a quantitative analysis of exchange rate volatilities and misalignment in Uzbekistan for the period of 1994q3–2005q2. The results suggest thatthe real exchange rate volatility and misalignment have depressing effects on the volume of trade, mainly exports in Uzbekistan. The Governments currency rationing policy was lessening the volatility proving that the policy-induced changes in exchange rate has a stabilizing effect on trade flows. The implied elasticity for the most significant real exchange rate volatility coefficient is -0.20. Using a two-step Engle-Granger technique import demand and export supply price elasticities are computed. The results are consistent with the predictions from a number of previous studies, and in particular, the estimated exports price elasticity for Uzbek economy ranges from 1.65 to 1.84, while import demand price elasticity is between -0.78 and -0.83. At the same time, relatively lower elasticity during ’the currency rationing’ period indicate that large devaluations, most likely, did not generate the expected improvements in the overall export performance.

Keywords: real exchange rate; volatility; misalignment; trade flows; Uzbekistan (search for similar items in EconPapers)
JEL-codes: C32 F41 F31 (search for similar items in EconPapers)
Date: 2008-03
New Economics Papers: this item is included in nep-opm
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Working Paper: The Effects of the Real Exchange Rate Volatility and Misalignments on Foreign Trade Flows in Uzbekistan (2008) Downloads
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