exchange rate volatility and irish uk trade 1979 1992 this study examines how exchange rate volatility affected ireland s exports to its most important trading partner the united kingdom from 1979 to 1992 to ensure reliable inferences regarding income and price elasticities and the impact of exchange rate volatility on exports the time series properties of the series used are investigated the analysis here is conducted at both aggregate and 2 digit sitc division levels since exchange rate volatility can reasonably be presumed to affect sectors differently since expectations matter for exchange rate determination real volatility was generated according to a first order garch process both real and nominal volatility were important determinants for over 35 of irish uk trade with positive effects predominating this may be due to the nature of irish firms operating in a small open economy where they have little option in dealing with increased exchange rate risk except to weather the storm for fear of losing market share or facing costs of either exit

the choice of exchange rate regime and the volatility of exchange rates after the asian crisis a counterfactual analysis the objective of this paper is to carry out a counterfactual analysis of the impact of alternative exchange rate regimes on the volatility of the nominal effective exchange rate neer and the bilateral rate against the us dollar for nine east asian countries after the asian financial crisis our hypothetical regimes include a unilateral basket peg ubp a common basket peg cbp and a hard peg against the dollar we find that a ubp would minimise effective exchange rate volatility for all countries and provides the highest regime gains compared to actual although the gains for a cbp are always less than those for a ubp the absolute differences between the two regimes appear to be small in terms of the bilateral relationship against the dollar the gains from a ubp or cbp could be quite significant for the non dollar peggers since a fall in effective instability would be accompanied by a fall in bilateral instability

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

exchange rate uncertainty and agricultural trade using a sample of bilateral trade flows across ten developed countries between 1974 and 1995 this article explores the effect of exchange rate uncertainty on the growth of agricultural trade as compared to other sectors based on a gravity model that controls for other factors likely to determine bilateral trade the results show that real exchange rate uncertainty has had a significant negative effect on agricultural trade over this period moreover the negative impact of uncertainty on agricultural trade has been more significant compared to other sectors

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 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

asean and china export rivals or partners in regional growth hina s initial opening to the world economy in the late 1980s followed by its relatively rapid trade liberalisation in the second half of the 1990s and its recent wto accession has prompted extensive debate amongst the policy community in many countries 1 governments of the asean group in particular have been extremely concerned at the prospect of fdi diversion and the loss of export market share in oecd economies to china this paper summarises detailed empirical research by the authors intended to strengthen the basis of evidence on the important issue of export rivalry in particular we seek to elucidate the underlying properties of comparative advantage and export competition in the countries concerned synthesising detailed trade flow and econometric analysis our econometric results indicate that in the short run at least asean and china are experiencing intensified export competition in prominent third markets such as japan and the us more extensive trade flow analysis reveals however that in the long run globalisation can accommodate export growth by all the economies of east asia if aggregate growth can be sustained to facilitate the structural adjustments necessary for an optimal regional division of labour more specifically the path forward is not without potential rivalry but wellinformed policy makers can anticipate emergent challenges and take the steps necessary to mitigate adjustment costs and promote longer term efficiency whatever the ultimate course of development in east asia it is clear that the forces at work are complex and in many cases unprecedented policy makers relying on

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

real exchange rate volatility and international trade a reexamination of the theory one of the issues that have received considerable attention in the comparison of the properties of alternative exchange rate regimes is the effect of exchange rate risk on the volume of trade it has been argued that the higher volatility of exchange rates witnessed since the adoption of the floating regime in 1973 has led to a decrease in international trade transactions this is because most trade contracts are not for immediate delivery of goods and since they are denominated in terms of the currency of either the importer or the exporter unanticipated fluctuations in the exchange rate affect realized profits and hence the volume of trade it is implicitly assumed that forward exchange markets that can help traders eliminate this type of variations in profits either are not available as it is true for the majority of currencies because most are not fully convertible thereby impairing forward markets or for some reason they are not utilized to fully hedge exchange risk present in trade transactions the empirical evidence regarding the effect of exchange rate risk on trade has at best been inconclusive the large majority of the empirical studies are unable to establish a systematically significant link between exchange rate variability and the volume of international trade whether on an aggregate or on a bilateral basis abrams 1 akhtar and hilton 2 cushman 4 5 6 and kenan and rodrik 12 find some significant negative effects of exchange volatility on exports however bailey tavlas and uhlan 3 hooper and kohlhagen 10 and an international monetary fund study 11 do not find any supporting evidence for the depressing effect of exchange rate volatility on international trade it is also interesting to note that in many of these studies a significant positive effect of exchange rate volatility on the volume of trade is found for some cases however the positive effect believed to be at odds with the theory was either ignored or dismissed as a perverse result since as far as volumes are concerned theoretical considerations

real output co movements in east asia any evidence for a monetary union of integration in the region would greatly shape the economic structure of each individual economy an d has direct implications for the effectiveness of domestic stabilisation policy and policy coordination this paper empiricall y examines the feasibility of forming a monetary union in east asia by assessing the real output co movements among these economies as suggested by the optimum curr ency area oca theory that losing monetary independence would be the major cost for adopting

why is it so difficult to find an effect of exchange rate risk on trade abstract it is commonly argued that exchange rate risk hampers international trade however the large literature on this subject has not yet provided conclusive evidence this paper analyzes why it is so difficult to obtain a clear answer from time series analyses we use data on bilateral aggregate u s exports to the other g7 countries the results show that as far as the exchange rate is concerned export decisions are mostly affected by the probability distribution of the about one year ahead rate the riskiness of the exchange rate at such a long horizon appears fairly constant over time with only short term fluctuations this makes it difficult to discover the true effect of exchange rate risk on trade from the time series data that are typically available

international trade with forward futures markets under exchange rate and price uncertainty abstract the paper examines a risk averse firm s decisions on the level of trade when the exchange rate and the commodity price are uncertain and the extent of forward exchange and commodity futures commitments first we verify the separation theorem and the full double hedging theorem second we investigate the implications of the existence of both forward foreign exchange and commodity futures markets in comparison to the case where only one or no market is available to the firm the second exercise enables us to focus on conditions under which establishing forward futures arrangements promotes international trade

exchange rate volatility and international trade the purpose of this note is to show that a positive effect of exchange rate volatility on export production has a theoretical basis the key to this claim is that as the exchange rate volatility increases so does the value of the real option to export to the world market higher volatility increases the potential gains from trade this may explain part of the mixed empirical findings regarding the effects of exchange rate risk on international trade

the parallel currency approach to asian monetary integration since the crisis of 1997 1998 there has been a proliferation of proposals for fostering asian monetary integration asian countries it is suggested should collectively peg their currencies to the dollar the yen or a dollar yen euro basket or establish a multilateral currency grid like the european monetary system ems the resulting exchange rate stability would promote intraregional trade simplify investment planning and encourage cross border participation in local bond markets experience with establishing and maintaining a system of stable exchange rates would help ready the region for the introduction of a single currency asia in this view should emulate europe s approach to regional monetary integration along with the attractions of the european example however there are also dangers defending a system of currency pegs in the presence of high capital mobility requires the close convergence of policies and the maintenance of confidence if either precondition is disturbed a country will require extensive financial support in order to defend its peg or to undertake an orderly realignment in practice asian countries possess neither the willingness to subordinate other policies to these imperatives nor the solidarity needed to offer extensive financial supports absent an appetite for political integration there is little readiness to create a regional central bank like the european central bank since there is no counterpart to the european parliament to hold it accountable for its actions hence there is little prospect of early monetary union to tie down expectations a system of asian currency pegs would consequently be fragile and crisis prone as a road to monetary unification it would be a dead end it would be better for governments to create an asian currency unit acu constituted as a weighted average of asian currencies and allow it to circulate alongside their national currencies this would have three advantages first it would not be necessary to stabilize exchange rates between the currencies comprising the basket hence fragility would be less second the parallel currency would be more stable than any one national currency in terms of aggregate asian production and exports it would thus be a vehicle for encouraging intraregional trade and investment third the decision to move to a single currency could be driven by economics rather than politics only when a critical mass of producers exporters and investors had adopted the parallel currency would it be clear that asian economies were ready for monetary unification

transition with insurance german unification reconsidered transformation of the economic system involves the risk of a transitory fall in living standards in german unification west germany promised to carry that risk for east germany paretian promise but also insisted on being paid an insurance fee that frequently neglected fee comprises nothing less than the bulk of east germany s endowment i e the state owned capital and land one share of the fee was arranged to go to the mostly west german previous owners another to the public sector the circumstances of privatizing the public sector s cut result in a third share going to the again mostly west german buyers and also help to explain the puzzle of wages and unemployment rising simultaneously some policy proposals that are now discussed amount to shifting the risk and or the fee back to the east germans although well motivated this would violate the original terms of the unification deal copyright 1992 by oxford university press

cycles of conflict an economic model abstract we propose a model of cycles of conflict and distrust overlapping generations of agents from two groups sequentially play coordination games under incomplete information about whether the other side consists of bad types who always take bad actions good actions may be misperceived as bad and information about past actions is limited conflict spirals start as a result of misperceptions but also contain the seeds of their own dissolution bayesian agents eventually conclude that the spiral likely started by mistake and is thus uninformative of the opposing group s type the agents then experiment with a good action restarting the cycle jel d72 d74 d83 z13

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

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

exchange rate volatility and pakistan s exports to the developed world 1974 85 abstract the paper attempts to estimate the impact of exchange rate uncertainty on pakistan s exports to the developed world for 1974 85 discovering strong evidence to suggest that exports were adversely affected by the increased variability of its bilateral exchange rates unlike much of the recent evidence on developed countries however it is the variability in nominal rather than real exchange rates that is significant the computations also suggest the presence of strong third country effects

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

the impact of exchange rate volatility on international trade flows despite the best efforts of economists a basic paradox as to the impact of exchange rate volatility on trade flows remains unresolved at both the theoretical and empirical level this paper surveys the vast literature in the area in an attempt to identify major issues which have contributed to the development of the debate and examine whether any general direction for consensus may be found

why is china so competitive measuring and explaining china s competitiveness this paper evaluates factors responsible for the competitiveness of china in the world economy and relative to its east asian rivals china has been highly successful in capturing world export markets chinese competitiveness is not just a matter of an undervalued exchange and extremely low labor costs it reflects primarily the coincidence of favorable cost conditions with improvements in china s ability to produce products that meet world market specifications these improvements are closely related to foreign participation in china s economy through foreign direct investment and joint venture enterprises

exchange rate policy options for post crisis southeast asia is there a case for currency baskets following the recent financial crises in southeast asia and elsewhere the perennial issue of the exchange rate policy options for small and open developing countries has resurfaced there seems to be an emerging consensus that the frequency with which soft pegs have been susceptible to speculative attacks in this era of escalating global capital flows has increased pressure for developing countries to adopt corner exchange rate regimes this paper takes issue with this popular one size fits all prescription of exchange rate arrangements for developing countries and explores exchange rate policy options for post crisis southeast asia the principal purpose of this paper is to discuss the case for currency baskets as a general regime in its own right for southeast asia as opposed to being a compromise between the two corner solutions

has exchange risk depressed international trade the impact of third country exchange risk abstract this paper argues that the effect of exchange risk on bilateral and aggregate trade flows should be analyzed by including the impact of third country exchange risk factors in addition to direct bilateral or multilateral risk after a theoretical examination of these effects us bilateral export flow to its six largest trading partners are analyzed empirically i find individuality and jointly significant third country risk effects in most cases in contrast to some recent bilateral efforts i find a steadily growing negative impact on trade flows from exchange risk during floating and in contrast to recent aggregate trade flow studies i conclude that there was no temporary decline in exchange risk during the late 1970s

exchange rate variability and trade why is it so difficult to find any empirical relationship this paper discusses why previous literature has found little evidence of any effect of exchange rate variability on international trade methodological and statistical issues are discussed in particular comparisons are made of estimations based on different specifications or using different data sets and changes in the results depending on the method used are shown