Effect of exchange rate volatility on trade in Sub-Saharan Africa☆

Senadza, Bernardin; Diaba, Desmond Delali

doi:10.1016/j.joat.2017.12.002

Cited by 87 publications

(61 citation statements)

References 37 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Risk aversion might affect firms' investment decisions in the presence of uncertainty. As noted by Senadza and Diaba (2017), one school of thought holds that risk-averse traders will substitute away from high-risk trading towards less risky trading, and hence will lower their volume of international trade and investment (McKenzie 1999;Saltari and Ticchi 2007). Another school of thought, which is based on the principles of meanvariance portfolio analysis, views higher risk as associated with higher returns, causing higher exchange rate volatility to be associated with a higher volume of trade and hence investment (De Grauwe 1996).…”

Section: Theoretical Frameworkmentioning

confidence: 99%

The effect of real exchange rate volatility on income distribution in South Africa

Aye¹,

Harris²

2019

WIDER Working Paper

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.Abstract: This study investigates the effect of real exchange rate volatility on the distribution of income between labour and capital in South Africa. Both symmetric and asymmetric effects are considered. Using quarterly data for 1985:1-2018:3 and local linear projection, we find that the immediate response of labour's income share to a one standard deviation shock in exchange rate volatility is negative. Moreover, high exchange rate volatility impacts negatively on labour's income share, while low exchange rate volatility impacts positively on labour income. As the magnitude of the effect of high exchange rate volatility is greater than that of low exchange rate volatility, the study documents evidence of an asymmetric effect. A shock increase in some control variables (real gross domestic product, investment, and openness) is followed immediately by a decline in labour income, while an increase follows a positive shock in the relative price of investment. The policy implications of these findings are discussed.

show abstract

Section: Theoretical Frameworkmentioning

confidence: 99%

The effect of real exchange rate volatility on income distribution in South Africa

Aye¹,

Harris²

2019

WIDER Working Paper

View full text Add to dashboard Cite

show abstract

“…However, many factors may affect trade between nations. In the context of high-risk aversion, the exchange rate volatility 1 is the main obstacle to trade flows (Satawatananon, 2014;Senadza and Diaba, 2017).…”

Section: Introductionmentioning

confidence: 99%

Effects of Exchange Rate Volatility on Trade: Evidence from West Africa

Fofanah¹

2020

JEBS

View full text Add to dashboard Cite

The objective of this paper has been to investigate the impact of exchange rate volatility on trade in the context of exports, imports, and the trade balance in West Africa. Applying the pooled Ordinary Least Square, the fixed effects, and the random effect models, and obtaining robust estimates for export and trade balance models by employing xtgls, panels (correlated) Corr (ar1), and adopting xtscc, fe regression with Driscoll-Kraay standard error to estimate the import model. The empirical results show that the impact of exchange rate volatility on exports and imports is insignificant. However, the result of the trade balance model shows a positive and significant link between exchange rate volatility and the trade balance. Thus, suggesting that traders tend to engage more in export activities with an increase in exchange rate volatility. Also, the analysis suggests that depreciation of the real exchange rate will lead to a decrease in exports. Thereby, confirming the limited production capability and heavy reliance on imported goods and services. Hence, this study recommends diversification of production activities and adopting strategies aiming at reducing dependence on imported goods and services. The empirical result shows a positive association between an increase in domestic economic activities of trading partners and exports of the West African countries. This implies that West African countries must engage in trade with countries that have a high economic growth rate. The result also shows a positive link between inflation rate and imports. This suggests the implementation of effective monetary policies geared towards controlling inflation.

show abstract

“…Some studies, however, reported no significance regarding the correlation between the exchange rate and export volume (Bahmani-Oskooee and Payesteh 1993;Hooper and Kohlhagen 1978). Senadza and Diaba (2017) have found that the exchange rate adversely affects exports in the short run, but found a positive relationship between them in the long run. Nevertheless, there is no significant impact of exchange rate volatility on imports.…”

Section: Introductionmentioning

confidence: 99%

The Impact of Thailand’s Openness on Bilateral Trade between Thailand and Japan: Copula-Based Markov Switching Seemingly Unrelated Regression Model

2020

View full text Add to dashboard Cite

The purpose of this paper is to analyze the impact of trade openness and the factors based on the gravity model on the bilateral trade flows between Thailand and Japan. The factors consist of GDP, distance, trade openness, and exchange rate. Bilateral trade is composed of two flows: Thailand’s export flow to Japan, and Thailand’s import flow from Japan. The specified gravity equations are estimated by Copula-based Markov switching seemingly unrelated regression approach. The best-fitting model is chosen based on the lowest Akaike information criterion (AIC) and Bayesian information criterion (BIC). The Normal and Student’s t distributions are for Thailand’s export equation and Thailand’s import equation, respectively. The Student’s t copula is applied for joint distribution. Analyzing the bilateral trade flow is separated into two situations, namely the high and the low growth markets. Empirical results show that distance provides a positive effect on the export in a high growth regime, but a negative impact on the export in a low growth regime. As for Thailand’s import flow, all variables, but especially trade openness, provide strong evidence supporting significance for both regimes. For the GDPs of both Thailand and Japan, trade openness and the exchange rate increase import flow in a high growth market. Meanwhile, the exchange rate decreases import flow in a low growth market. The Markov Switching Probability Estimation notes that Thailand’s trading with Japan is mostly in the fast-growing market.

show abstract

Effect of exchange rate volatility on trade in Sub-Saharan Africa☆

Cited by 87 publications

References 37 publications

The effect of real exchange rate volatility on income distribution in South Africa

The effect of real exchange rate volatility on income distribution in South Africa

Effects of Exchange Rate Volatility on Trade: Evidence from West Africa

The Impact of Thailand’s Openness on Bilateral Trade between Thailand and Japan: Copula-Based Markov Switching Seemingly Unrelated Regression Model

Contact Info

Product

Resources

About