On the impact of exchange rate volatility on Tunisia’s trade with 16 partners: an asymmetry analysis

Karamelikli

2021

SEF

Self Cite

Purpose The purpose of this paper is to show that in some industries the linear model may not reveal any significance link between exchange rate volatility and trade flows but once nonlinear adjustment of exchange rate volatility is introduced, the nonlinear model reveals significant link. Design/methodology/approach This paper uses the linear ARDL approach of Pesaran et al. (2001) and the nonlinear ARDL approach of Shin et al. (2014) to assess asymmetric effects of exchange rate volatility on trade flows between Germany and Turkey. Findings This paper consider the experiences of 75 2-digit industries that trade between Turkey and Germany. When the study assumed the effects of volatility to be symmetric, the study found short-run effects in 31 (30) Turkish (German) exporting industries that lasted into the long run in only 10 (13) Turkish (German) exporting industries. However, when the study assumed asymmetric effects and relied upon a nonlinear model, the study found short-run asymmetric effects of volatility on exports of 55 (56) Turkish (German) industries. Short-run asymmetric effects lasted into long-run asymmetric effects in 10 (25) Turkish (German) exporting industries. All in all, we found that almost 25% of trade is hurt by exchange rate volatility. Originality/value This is the first paper that assesses the possibility of asymmetric effects of exchange rate volatility on German–Turkish commodity trade.

Section: The Models and Methodsmentioning

confidence: 99%

Exchange rate volatility and Turkish–German commodity trade: an asymmetry analysis

Karamelikli

2021

SEF

Self Cite

“…If increased volatility hurts trade flows, so can decreased volatility if traders lose their confidence in the ability of the government to stabilise the exchange rate as a sound macro policy, hence, an asymmetric response. Bahmani‐Oskooee and Nouira (2019) recently argued that it is also possible for traders to assign higher weights for losses compared to gains from holding foreign exchange to hedge against future uncertainties. If so, they will react to exchange rate volatility asymmetrically.…”

Section: The Literaturementioning

confidence: 99%

The U.S.‐Canadian trade and exchange rate uncertainty: Asymmetric evidence from commodity trade

Harvey

2021

World Economy

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“…Maskus (1986) disaggregated the US exports to the United Kingdom by one-digit SITC categories and showed that exchange rate volatility has adverse impact on four industries, that is, machinery, transport, chemicals, and miscellaneous manufacturers. However, when Bahmani-Oskooee and Kovyryalova (2008) disaggregated UK-US trade flows by three-digit SITC industries and included 177 three-digit industries in their analysis, they found much more support for significant effects of exchange rate volatility on the US exports to the United Kingdom and her imports from the United Kingdom (or UK exports to the United States). More precisely, using annual data over the period , they found significant short-run effects of volatility on exports of 99 industries and imports of 109 industries.…”

Section: Introductionmentioning

confidence: 98%

On the asymmetric effects of exchange‐rate volatility on trade flows: Evidence from US–UK Commodity Trade

Scottish J Political Eco

Huynh

Nasir

2020

Self Cite

We consider the response of each of the 67 industries that trade between the United States and United Kingdom to the volatility of the real dollar-pound exchange rate. When we follow previous research and estimate a linear ARDL model for each industry, we find short-run effects of volatility in 22 US exporting industries to the United Kingdom that last into the long run only in nine industries. As for the UK exports to the United States, we find short-run effects in 18 industries that last into the long run in 15 industries. However, when we estimate a nonlinear model for each industry, we find short-run effects of volatility on 41 US exporting industries and on 43 UK exporting industries, all in an asymmetric manner. Short-run asymmetric effects lasted into long-run asymmetric effects in 24 US exporting industries to the United Kingdom and in 33 UK exporting industries to the United States. While total trade shares of industries from the linear models were negligible, those of the industries from the nonlinear models were significant in size, in the tune of one-third of the trade.