Volatility and Irish exports

Donal Bredin and John Cotter

Centre for Financial Markets Working Papers from Research Repository, University College Dublin

Abstract: We analyse the impact of volatility per se on exports for a a small open economy concentrating on Irish trade with the UK and the US. An important element is that we take account of the time lag between the trade decision and the actual trade or payments taking place by using a flexible lag approach. Rather than adopt a single measure of risk we also adopt a spectrum of risk measures and detail varied size characteristics and statistical properties. We find that the ambiguous results found to date may well be due to not taking account of the timing effect which varies substantially depending on which volatility measure is used. However, the foreign exchange volatility effect is consistently positive, indicating the dominance of exporters expectations of possible profitable opportunities from future cash flows. The potential negative aspects of trade, the entry and exit costs, are accounted for by a negative influence of income volatility on trade.

Keywords: Exports; Risk measurement; Distributed lags; Exports--Ireland; Risk--Econometric models; Distributed lags (Economics) (search for similar items in EconPapers)
JEL-codes: C32 C51 F14 F31 (search for similar items in EconPapers)
Date: 2004-10
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http://hdl.handle.net/10197/1165 First version, 2004 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:rru:cfmwps:10197/1165

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