does exchange rate variability depress trade flows evidence from error correction models this paper examines the impact of exchange rate volatility on the trade flows of the g 7 countries in the context of a multivariate error correction model the error correction models do not show any sign of parameter instability the results indicate that the exchange rate volatility has a significant negative impact on the volume of exports in each of the g 7 countries assuming market participants are risk averse these results imply that exchange rate uncertainty causes them to reduce their activities change prices or shift sources of demand and supply in order to minimize their exposure to the effects of exchange rate volatility this in turn can change the distribution of output across many sectors in these countries it is quite possible that the surprisingly weak relationship between trade flows and exchange rate volatility reported in several previous studies are due to insufficient attention to the stochastic properties of the relevant time series copyright 1993 by mit press

nonlinear effects of exchange rate volatility on the volume of bilateral exports in this paper we investigate empirically the impact of exchange rate volatility on real international trade flows utilizing a 13 country data set of monthly bilateral real exports for 1980 1998 we compute one month ahead exchange rate volatility from the intra monthly variations in the exchange rate to better quantify this latent variable we find that the effect of exchange rate volatility on trade flows is nonlinear depending on its interaction with the importing country s volatility of economic activity and that it varies considerably over the set of country pairs considered copyright 2003 john wiley sons ltd

an investigation of the effects of exchange rate volatility on exports in east asia abstractthis study investigates the effects of the exchange rate volatility on the export flows of indonesia malaysia republic of korea singapore thailand and the philippines during 1974 2011 towards this goal a trade weighted real effective rather than the bilateral exchange rate and three different measures of volatility i e obtained from an arch model a garch model and a moving average standard deviation measure are used in this study specifically the export flows between six asian countries and the rest of the world are investigated rather than focusing on trade with only one country our findings reveal that the exchange rate volatility has a significant impact on export flows in the short run as well as in the long run for all the countries in the sample the impact in the long run is predominantly negative with the exception of singapore but in the short run the impact varies across countries moreover our results are robust to the alternative measures of volatility used and most of

an experimental examination of labor supply and work intensities estimated negative substitution effects on work hours question the empirical validity of the classical labor supply model estimates are reconciled by allowing a dual choice of hours and effort for piecerate workers in such a model these negative substitution effects result from substituting on and off the job leisure we test our model using controlled experimentation on human subjects these experiments while not naturally occurring environments represent real economic choices and can generate data unavailable elsewhere e g effort data the results support our model and they have implications both for labor management and for empirical research focusing only on the hours choice the classical static model of the labor leisure choice offers positive compensated wage effects on hours of work as its main testable implication previous attempts to test this hypothesis with field data have cast doubt on the empirical validity of the static labor supply model due to the frequency of negative estimated compensated wage elasticities a limitation of the model is that it views the choice of hours of work as the only

on eliciting beliefs in strategic games several recent studies in experimental economics have tried to measure beliefs of subjects engaged in strategic games with other subjects using data from one such study we conduct an experiment where our experienced subjects observe early rounds of strategy choices from that study and are given monetary incentives to report forecasts of choices in later rounds we elicit beliefs using three different scoring rules linear logarithmic and quadratic we compare forecasts across the scoring rules and compare the forecasts of our trained observers to forecasts of the actual players in the original experiment we find significant differences across scoring rules the improper linear scoring rule produces forecasts closer to 0 and 1 than the proper rules and these forecasts are poorly calibrated the two proper scoring rules induce significantly different distributions of forecasts we find that forecasts by observers under both proper scoring rules are significantly different from the forecasts of the actual players in terms of accuracy calibration and the distribution of forecasts we also find evidence for belief convergence among the observers

what went wrong with the recent reforms in the southern cone this paper describes and interprets the outcome of the reform packages in chile argentina and uruguay during 1974 83 it is shown that all three countries experienced initial success with the rescue operation from the severe macroeconomic disequilibrium at the inception of the reforms the paper then discusses the areas in which the reforms were successful and why the countries experienced boom bust cycles resulting in large increases in external indebtedness and internal financial crises the paper attributes the failure of the reforms to a combination of policy inconsistencies implementation difficulties and market frictions jointly these factors generated a sustained appreciation of the real exchange rate and a large spread between the cost of dollar denominated and peso denominated loans in turn the appreciation and interest rate difference created protracted opportunities for arbitrage that distracted firms from the business of production

u s bilateral trade flows and exchange risk during the floating period abstract this paper tests for real exchange rate risk effects on u s bilateral trade flows during the floating period using several new as well as previously used risk measures significant negative effects occur in five of six u s import flows and in two of six u s export flows with one export flow showing a significant positive effect these results are consistent with several previous findings for aggregate u s trade two risk measures using the forward exchange rate and assuming a time varying risk premium provide marginally more significant results than the others

deviations from purchasing power parity in the long run this paper demonstrates that deviations from purchasing power parity reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible rate periods for a wide variety of countries and in both monthly and annual data since this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper proposes an alternative explanation which instead relies on financial arbitrage in bonds as the underlying mechanism this paper will demonstrate that deviations from purchasing power parity ppp reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible exchange rate periods for a wide variety of countries and in both monthly and annual data this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper therefore proposes an alternative explanation which does not presuppose free trade in goods but which instead relies on financial arbitrage in bonds as the underlying mechanism the major implication of the theory and the results is that ppp is as likely to be violated in the long as in the short run as an empirical matter deviations from ppp can be observed for most currencies at any instant see kravis et al 21 stockman 37 and genberg 15 among others these deviations are typically both cumulative and persistent the real exchange rate can remain on either side of parity for lengthy but variable time intervals of a year or more as a consequence the current consensus shared

has the european monetary system led to more exports evidence from four european union countries abstract we attempt to investigate whether the exchange rate mechanism erm period has coincided with an increase in intra eu exports we conclude that this has not been the case but it is likely that the elimination of nominal exchange rate variability arising from a single currency will boost intra european union trade

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

exchange rate volatility and foreign trade evidence from thirteen ldc s this article investigates empirically the impact of real exchange rate volatility on the export flows of 13 less developed countries ldc s over the quarterly period 1973 1996 estimates of the cointegrating relations are obtained using johansen s multivariate procedure estimates of the short run dynamics are obtained for each country using the error correction technique the major results show that increases in the volatility of the real effective exchange rate approximating exchange rate uncertainty exert a significant negative effect on export demand in both the short run and the long run in each of the 13 ldc s these effects may result in significant reallocation of resources by market participants

on the sensitivity of the volume and volatility of bilateral trade flows to exchange rate uncertainty we present an empirical investigation of the hypotheses that exchange rate uncertainty may have an impact on both the volume and variability of trade flows by considering a broad set of industrial countries bilateral real trade flows over the period 1980 1998 similar to the findings of earlier theoretical and empirical research our first set of results shows that the impact of exchange rate uncertainty on trade flows is indeterminate our second set of results provides new and novel findings that exchange rate uncertainty has a consistent positive and significant effect on the volatility of bilateral trade flows helping us better understand macroeconomic volatility jel f17 f31 c22

real exchange rate volatility financial crises and exchange rate regimes this paper examines real exchange rate rer volatility in eighty countries around the world during the period 1970 to 2011 two main questions are raised are structural breaks in rer volatility related to changes in exchange rate regimes or financial crises and do these two events affect the permanent and transitory components of rer volatility to answer them we employ two complementary procedures that consist in detecting structural breaks in the rer series and decomposing volatility into its permanent and transitory components our results suggest that structural breaks in rer volatility coincidence with financial crises and certain changes in nominal exchange rate regimes moreover our findings confirm that rer volatility does increase with the global financial crises and detect that the more flexible the exchange rate regime the higher the volatility of the rer using a de facto exchange rate classification

exchange rate volatility and aggregate export growth in bangladesh the long and short run determinants of bangladeshi export growth are examined these are modelled as depending on world trade volume bangladeshi and world export prices and exchange rate volatility several techniques are used to estimate and test hypotheses about the cointegration space of these variables we find that there are two plausible restricted cointegrating vectors one appears to be an export demand while the other is suggestive of an export supply these are then imposed on an error correction model estimates suggest that in the long run bangladeshi export growth is driven by the volume of world trade and is negatively and inelastically related to the volatility of bangladeshi exchange rates once these long run effects are accounted for it is found that none of the variables significantly explains any short run changes in export growth

representative evidence on lying costs abstract a central assumption in economics is that people misreport their private information if this is to their material benefit several recent models depart from this assumption and posit that some people do not lie or at least do not lie maximally these models invoke many different underlying motives including intrinsic lying costs altruism efficiency concerns or conditional cooperation to provide an empirically validated microfoundation for these models it is crucial to understand the relevance of the different potential motives we measure the extent of lying costs among a representative sample of the german population by calling them at home in our setup participants have a clear monetary incentive to misreport misreporting cannot be detected reputational concerns are negligible and altruism efficiency concerns or conditional cooperation cannot play a role yet we find that aggregate reporting behavior is close to the expected truthful distribution suggesting that lying costs are large and widespread further lab experiments show that this result is not driven by the mode of communication

the collapse of purchasing power parities during the 1970 s one of the striking facts concerning the relationship beiveen prices and exchange rates during the 1970 s has been the dismal performance of the predictions of the simple versions of the purchasing power parity doctrine ppp that doctrine in its absolute version states that the equilibrium exchange rate between domestic and foreign currencies equals the ratio of domestic to foreign price levels the relative version of the doctrine relates equilibrium changes in exchange rates to changes in the ratio of domestic to foreign prices during the 1970 s short run changes in exchange rates bore little relationship to short run differentials in national inflation rates and frequently divergences from purchasing power parities have been cumulative this paper reviews and analyzes the empirical record of exchange rates and prices during the 1970 s and the analysis is based on the experience of the dollar pound the dollar frecch franc and the dollar dm exchange rates section 2 presents the evidence on ppp during the 1970 s and contrasts it with the evidence from the 1920 s a period during which the doctrine held up reasonably well this analysis is relevant for assessing whether the flexible exchange rate system was successful in providing national economies with an added degree of insulation from foreign shocks and whether it provided policymakers with an added instrument for the conduct of macroeconomic policy the evidence regarding devia tions from purchasing power parities is also relevant for determining whether there is a case for managed float section 3 attempts to explain what went wrong with

the economics of credence goods an experiment on the role of liability verifiability reputation and competition credence goods markets are characterized by asymmetric information between sellers and consumers that may give rise to inefficiencies such as under and overtreatment or market breakdown we study in a large experiment with 936 participants the determinants for efficiency in credence goods markets while theory predicts that liability or verifiability yield efficiency we find that liability has a crucial but verifiability at best a minor allowing sellers to build up reputation has little influence as predicted seller competition drives down prices and yields maximal trade but does not lead to higher efficiency as long as liability is violated jel d12 d82

state credit programs and the peasantry under populist regimes lessons from the apra experience in the peruvian amazon abstract a study near iquitos peru finds that a national agricultural program implemented in the late 1980s which provided peasants with access to credit secure land tenure and grassroots organization promised to reduce rather than improve the welfare of intended beneficiaries new economic conditions and strategic behaviors engendered by the program threatened to combine through a process of community enclosure and competitive exclusion to undermine the subsistence viability of peasant communities general lessons are drawn for more effective rural development programs ones that pay particular attention to direct and indirect feedback effects of macroeconomic policy the factors that limit peasant economic competitiveness and to the fundamental spatiality of development processes

exchange rate volatility and exports new empirical evidence from the emerging east asian economies this paper examines the impact of bilateral real exchange rate volatility on real exports of five emerging east asian countries among themselves as well as to 13 industrialised countries we recognise the specificity of the exports between the emerging east asian and industrialised countries and employ a generalised gravity model in the empirical analysis we use a panel comprising 25 years of quarterly data and perform unit root and cointegration tests to verify the long run relationship among the variables the results provide strong evidence that exchange rate volatility has a negative impact on the exports of emerging east asian countries in addition the results suggest that the pattern of bilateral exports is influenced by third country variables an increase in the price competitiveness of other emerging east asian countries has a negative impact on a country s exports to a destination market but the magnitude of the impact is relatively small these results are robust across different estimation techniques and do not depend on the variable chosen to proxy exchange rate uncertainty the results of the gmm iv estimation also confirm the negative impact of exchange rate volatility on exports and suggest that this negative relationship is not driven by simultaneous causality bias

exchange rate volatility and international trade a general equilibrium analysis abstract we analyze the relation between exchange rate volatility and the volume of international trade in a general equilibrium stochastic endowment economy with imperfect international commodity markets and treating both variables as endogenous even in the simplest model the sign of the relation depends on the source for the change in volatility for instance more volatility of the endowments and higher costs to international trade both boost exchange risk and lower welfare but the first increases the expected volume of trade while the second decreases trade note that even the inter equilibria relation between trade and welfare is ambiguous

exchange rate volatility exchange rate regime and trade volume evidence from the uk us export function 1889 1999 abstract this paper investigated the impact of exchange rate volatility and exchange rate regime on the british exports to the united states using data for the period 1889 1999 the empirical findings suggest that neither exchange rate volatility nor the different exchange rate regimes that spanned the last century had an effect on export volume

one money one market the effect of common currencies on trade currency unions their dramatic effect on international trade a gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade the panel data bilateral observations for five years during 1970 90 covering 186 countries includes 300 observations in which both countries use the same currency i find a large positive effect of a currency union on international trade and a small negative effect of exchange rate volatility even after controlling for a host of features including the endogenous nature of the exchange rate regime these effects statistically significant imply that two countries sharing the same currency trade three times as much as they would with different currencies currency unions like the european emu may thus lead to a large increase in international trade with all that that entails andrew rose

economic policy uncertainty and dollar pound exchange rate return volatility abstract the extent to which economic policy uncertainty epu amplifies exchange rate volatility has been an important research question for at least a decade previous research has investigated this relationship using monthly data concluding that epu imparts an effect on exchange rate volatility either contemporaneously or with a one month lag the use of monthly frequency however may not provide an accurate causal interpretation and may even compromise the accuracy of the estimates if the natural cycles of epu are shorter than a month to address this econometric concern i construct uncertainty measures at a daily frequency and estimate a garch model using daily usd british pound returns the evidence indicates that epu contributes to exchange rate volatility much more quickly than monthly data can detect using a regression technique for separating epu from non policy economic uncertainty i find that non policy market uncertainty increases volatility more than epu does

on trust in honesty and volunteering among europeans cross country evidence on perceptions and behavior abstract we conduct an experimental study among european citizens regarding cross cultural perceptions related to trust in two dimensions volunteerism and honesty we use representative samples from five major economies of the euro area france germany italy the netherlands and spain we find that european citizens rely on nationality to infer behavior assessments of behavior show a north south pattern participants from northern countries are perceived to be more honest and to provide more effort in a volunteering game than participants from southern countries actual behavior is however not always in line with these assessments assessments of honesty show strong evidence of social projection participants expect other european citizens to be less honest if they are culturally closer to themselves assessments of volunteerism instead show that both northern and southern europeans expect higher performance in northern than in southern european countries

exchange rate effects on the volume and variability of trade flows 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 microstructure shocks fundamental factors driving the exchange rate process or a noisy signal of policy innovations providing a rationale for the contradictory empirical evidence in the literature we also show that exchange rate uncertainty emanating from general microstructure shocks and the fundamental factors reduces the variability of trade flows while that related to a noisy signal of policy innovations increases variability

international trade and exchange rate volatility for currencies with well developed forward markets several papers have investigated the conjectured negative relationship between trade and short term exchange rate volatility without being very successful a theoretical explanation for the empirical anomalies is provided by solving explicitly for the forward rate because importers and exporters are on opposite sides of the forward market so is their exposure towards exchange rate volatility moreover which trade flow benefits and which one loses from increased volatility is determined by the signs of the aggregate net foreign currency exposure and the aggregate measure of risk aversion

does the exchange rate follow a random walk a monte carlo study of four tests for a random walk abstract several authors have urged that real and nominal exchange rates follow a random walk conditions under which the exchange rate follows a random walk are reviewed in this paper many of these do not appear to hold therefore the empirical evidence presents a puzzle some evidence suggets the exchange rate follows a random walk while other evidence suggests the opposite should be true this paper attempts to reconcile the evidence it is argued that the tests for a random walk have low power monte carlo evidence on four tests for a random walk is presented that suppors this claim

does real exchange rate volatility affect sectoral trade flows this article investigates empirically the effect of real exchange rate volatility on sectoral bilateral trade flows between the united states and its top 13 trading partners our investigation also considers those effects on trade flows that may arise through changes in income volatility and the interaction between income and exchange rate volatilities we provide evidence that i exchange rate volatility does not systematically affect sectoral trade flows ii income volatility has little impact on trade flows and iii the effect of the interaction term on trade flows is opposite that of exchange rate volatility dampening its impact on trade flows

on some international parity conditions an empirical investigation abstract this paper investigates weak semi strong and strong forms of the following international parity conditions a uncovered interest parity b the hypothesis of equal ex ante real interest rates and c ex ante purchasing power parity the main results are as follows using data which roughly cover the 1975 1984 decade we find little evidence in favor of the strong form of the parity conditions under consideration however most test results are consistent with the weak forms finally regarding the semi strong forms the results are mixed

a multivariate garch model of international transmissions of stock returns and volatility the case of the united states and canada this study examines the short run dynamics of returns and volatility for stocks traded on the new york and toronto stock exchanges the main finding is that inferences about the magnitude and persistence of return innovations that originate in either market and that transmit to the other market depend importantly on how the cross market dynamics in volatility are modeled moreover much weaker cross market dynamics in returns and volatility prevail during later subperiods and especially for canadian stocks with shares dually listed in new york implications for international asset pricing hedging strategies and regulatory policy are discussed

the impact of structural adjustment programs on manufacturing lessons from nicaragua abstract since 1988 nicaragua has applied structural adjustment programs including stabilization and liberalization measures as of 1991 these measures succeeded in combating inflation but they did not lead to increased production nor to an improved trade balance the nicaraguan manufacturing sector was especially vulnerable because of a decade long lack of investment and the non market environment in which firms operated in the 1980s the combination of trade liberalization with an overvalued exchange rate and financial liberalization had in particular negative effects on manufacturing production and investment in addition specific industrial policies are necessary to increase manufacturing competitiveness

growth and exchange rate volatility a panel data analysis the aim of this article is to assess the role of real exchange rate rer volatility on long run economic growth for a set of 82 advanced and emerging economies using a panel data set ranging from 1970 to 2009 with an accurate measure for exchange rate volatility the results for the two step system generalized method of moments gmm panel growth models show that a more less volatile rer has a significant negative positive impact on economic growth the results are also robust for different model specifications

on the trade impact of nominal exchange rate volatility what is the effect of nominal exchange rate variability on trade i argue that the methods conventionally used to answer this perennial question are plagued by a variety of sources of systematic bias i propose a novel approach that simultaneously addresses all of these biases and present new estimates from a broad sample of countries from 1970 to 1997 the estimates indicate that nominal exchange rate variability has no significant impact on trade flows

bayesian estimation of exchange rate regime choice with spatial effect abstract exchange rate arrangements and trade are inherently connected exchange rate volatility has a significant impact on trade volumes and trading partners thus could affect each other s exchange rate regime choice this spatial effect among trading partners has been overlooked in empirical studies of countries exchange rate regime choices this paper addresses this deficit by presenting a specifically designed ordered probit model with spatial effect the model is estimated using a bayesian method that utilizes data augmentation with gibbs sampling the results obtained here differ markedly from those presented in the existing literature

peru s return toward an open economy macroeconomic complications and structural questions abstract the peruvian program of stabilization and liberalization initiated in august 1990 has been more extreme than those in mexico in the 1980s or in chile in the pinochet period it has involved exceptionally high costs potentially constructive changes are interacting with each other in ways adverse for recovery of production employment and exports it could worsen the country s persisting strains of poverty and violence or could on the contrary help answer them depending on how liberalization is pursued comparisons with other liberalization programs especially with the two different versions used in chile point to alternatives that might be helpful for peru and for the design of such programs in other countries

currency hedging and goods trade abstract a puzzle in empirical international finance is the difficulty in finding a large and negative effect of exchange rate volatility on international trade a common explanation is the availability of hedging instruments this paper examines the empirical validity of this explanation using data on over 1000 country pairs which countries have currency hedging instruments is not perfectly observable this paper deals with the problem by specifying an endogenous regime switching regression there are two main findings first there is no evidence in the data to support the validity of the hedging hypothesis second for country pairs with large trade potential exchange rate volatility deters goods trade to an extent much larger than that typically has been documented in the literature without using the switching regression specification

in search of homo economicus behavioral experiments in 15 small scale societies we can summarize our results as follows first the canonical model is not supported in any society studied second there is considerably more behavioral variability across groups than had been found in previous cross cultural research and the canonical model fails in a wider variety of ways than in previous experiments third group level differences in economic organization and the degree of market integration explain a substantial portion of the behavioral variation across societies the higher the degree of market integration and the higher the payoffs to cooperation the greater the level of cooperation in experimental games fourth individual level economic and demographic variables do not explain behavior either within or across groups fifth behavior in the experiments is generally consistent with economic patterns of everyday life in these societies

going multinational under exchange rate uncertainty abstract we analyze a model where an exporting firm competes a la cournot in a foreign market the firm faces exchange rate uncertainty and has the option to invest abroad the paper contributes four results first real option pricing techniques are used to derive the optimal timing rule of the investment and the price of the firm and foreign competitors second the sunk cost of entry into the foreign market introduces hysteresis in direct investment flows we find that the degree of hysteresis grows with the number of firms in the industry third we determine the conditions under which dumping may appear and the role of fdi in precluding this type of dumping fourth tariffs have the well known fdi inducing effect more so in less competitive markets and are more effective at deterring delocation furthermore a tariff might have the effect of triggering dumping

exchange rate volatility and international trading strategy abstract it is usually argued that an increase in exchange rate volatility reduces the volume of international trade as trading firms are risk averse this paper shows that exporting firms benefit under fairly general conditions from an increase in exchange rate volatility firms optimally adjust their export volumes to the level of the exchange rate exporting is an option which is exercised if profitable in addition the paper presents conditions under which the volume of international trade grows with exchange rate volatility

the impact of exchange rate volatility on brazilian manufactured exports the purpose of this paper is to examine the relation between exchange rate volatility and the volume of exports using brazilian data after establishing the existence of cointegration among the variables included in our model we estimated the long run coefficients by means of an auto regressive distributed lag ardl model our results show that exchange rate volatility had a significantly negative effect on brazilian manufactured exports in the period 1986 2002

exchange rate shocks and trade a multivariate garch m approach abstract we build on the recent literature studying the effects of uncertainty on trade by introducing a model that combines a reduced form vector autoregression for the growth rates of exports foreign income and the real exchange rate rer with a multivariate garch model up to 12 lags of several conditional standard deviations are added to relevant mean equations and all parameters are estimated simultaneously using maximum likelihood thus allowing us to avoid two step procedures that are common in the literature using a large data set of both developed and emerging countries we find evidence that rer uncertainty negatively impacts trade for several less developed countries we also find that rer uncertainty tends to be associated with a real currency appreciation when we compute generalized impulse response functions to study the impacts of unexpected shocks to rer growth on export growth the results are typically asymmetric positive shocks generate substantial negative responses while unexpected depreciations produce relatively smaller positive responses especially in our developing country sample

bilateral trade flows the linder hypothesis and exchange risk bilateral trade flows are used to examine the linder hypothesis and the effect of exchange rate variability in a gra vity type trade model derived from an underlying demand and supply mo del a behavioral model is used to justify examining these issues joi ntly the model performs well empirically using a sample of seventeen countries for the period 1974 82 the authors find overwhelming supp ort for the linder hypothesis and this version of the gravity model moreover they find strong support for the hypothesis that increased exchange rate variability affects bilateral trade flows copyright 1987 by mit press

exchange rate volatility international trade and the value of exporting firms abstract increased exchange rate volatility positively affects the value of exporting firms via the price and volume impacts of exchange rates and also makes an exporting strategy more attractive relative to the direct investment investment in export production capacity could therefore be a positive function of exchange rate volatility firms would also be more willing to sustain losses i e to engage in dumping before they abandon their export markets the effect on the volume and value of trade is ambiguous

does exchange rate stability increase trade and welfare we develop a simple general equilibrium framework to study the effect of the exchange rate system on trade and welfare an important feature of the model is deviations from purchasing power parity caused by rigid price setting in buyers currency we find the following first exchange rate stability is not necessarily associated with more trade in a simple benchmark model with separable preferences and only monetary shocks trade is unaffected by the exchange rate system consistent with most evidence second both trade and welfare can be higher under either exchange rate system depending on preferences and on the monetary policy rules followed under each system finally in general there is no one to one relationship between the levels of trade and welfare across exchange rate systems

exchange rate volatility and intra asia trade evidence by type of goods this paper examines the impact of intra asia exchange rate volatility on intra asia trade in primary goods intermediate goods equipment goods and consumption goods from 1980 to 2009 for asia the evidence shows that as intraregional exchange rate volatility increases intraregional exports in these goods fall this adverse impact is even more pronounced in the subregion of association of southeast asian nations asean 5 comprising asean member countries plus the people s republic of china hong kong china japan the republic of korea and taipei china and especially among intermediate and equipment exports again the impact magnifies in an even smaller subgroup excluding the smaller asean economies these results underline the significant impact of exchange rate volatility on the region s production networks for south asia however exchange rate volatility appears to have a positive impact on exports still caution is warranted given that south asian economies trade relatively little with each other

exchange rate variability and the export demand for malaysia s semiconductors an empirical study this article examines the effects of exchange rate variability on export demand for semiconductors which is the largest sub sector of electronics industry in malaysia as reported by malaysian industrial development authority mida 2004 the empirical results which are estimated based on the johansen s multivariate cointegration tests and error correction model suggest that there is a unique long run relationship among quantities of export relative price real foreign income and real exchange rate variability the major finding of this article is that the variability of real exchange rate has some effect on semiconductor exports in both the long run and the short run in the light of rapid advances in technology in the global markets for electronics products the findings are useful to policy makers for the design and target of appropriate exchange rate and industrial policies to enhance the export competitiveness of semiconductor industry

exchange rate variability and the level of international trade abstract theoretical research has shown that under reasonable assumptions exchange rate variability ought to depress the level of trade this paper builds a theoretical model designed to exaggerate the negative effect of exchange rate variability on trade in order to calibrate an upper bound to the potential size of this effect numerical analysis demonstrates that exchange rate variability of the magnitude currently observed among industrial countries has an insignificant effect on the level of trade this result is robust with respect to a wide range of parameter values and with respect to reasonable extensions of the model

uncertainty and export performance evidence from 18 countries we study a sample of nine developed and nine developing countries to evaluate the questions of how foreign income uncertainty and real exchange rate rer uncertainty impact international trade and how those impacts vary according to stage of development rer uncertainty has a negative and significant impact on export growth for six of the nine less developed countries in our sample while it has an insignificant effect for a majority of the developed countries in both groups foreign income uncertainty has a more pervasively significant and frequently larger influence on trade than does rer uncertainty

volatility transmission between stock and foreign exchange markets a connectedness analysis abstractthis paper empirically investigates volatility transmission among stock and foreign exchange markets in seven major world economies during the period july 1988 to may 2018 to this end we

time to build option value and investment decisions abstract investment decisions and outlays are often made sequentially for example the rate at which construction proceeds is usually flexible and can be adjusted with the arrival of new information traditional discounted cash flow methods which treat the pattern of investment as fixed ignore this flexibility and understate the value of the project this paper uses contingent claims analysis to derive optimal decision rules and to value such investments we determine the effects of time to build opportunity cost and uncertainty on the investment decision for reasonable parameter values we show how a simple npv rule can lead to gross errors

the impact of the post 1972 floating exchange rate regime on us exports by employing the techniques of cointegration and error correction models this article empirically investigates the impact of the post 1972 floating exchange rate regime on the volume of us bilateral exports to canada germany japan and the uk the econometric models specified in the analysis were estimated using quarterly data for the sample period 1959 1 1997 4 the empirical results provide evidence that the post 1972 exchange rate regime is less conducive to trade than the bretton woods fixed exchange rate regime

reference points and effort provision a key open question for theories of reference dependent preferences is what determines the reference point one candidate is expectations what people expect could affect how they feel about what actually occurs in a real effort experiment we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision we find that effort provision is significantly different between treatments in the way predicted by models of expectation based reference dependent preferences if expectations are high subjects work longer and earn more money than if expectations are low

exchange risk exposure and the option to trade rather than impeding trade increased exchange rate uncertainty may on average create trade as it implies a higher probability that ex post deviations from commodity price parity will exceed tariffs and transportation costs we demonstrate such an effect in a small country short term model under the alternative assumptions of perfect competition and of a monopolist trader producer the proofs rely on the fact that such firms exposures can be replicated and hedged by standard options under partial monopoly scenarios the effect of volatility is ex ante unclear though jel f31