The effects of exchange rate uncertainty on exports

Rahman, Sajjadur; Serletis, Apostolos

doi:10.1016/j.jmacro.2008.12.005

Cited by 46 publications

(35 citation statements)

References 25 publications

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“…Further, we investigate the asymmetric effect of exchange rate volatility which was not considered in the previous studies. Our methodology is similar to that used by Rahman and Serletis (2009) who examine the effect of exchange rate uncertainty on exports using monthly data for the US over the period 1973:1 to 2007:1 and find that exchange rate uncertainty has a negative and significant effect on US exports and that exports respond asymmetrically to positive and negative exchange rate shocks of equal magnitude. However, we use a more recent data which includes both the pre-and post-global financial crisis than Rahman and Serletis (2009).…”

Section: Literature Reviewmentioning

confidence: 98%

“…The theoretical literature to explain the relationship between exchange rate volatility and exports is ambiguous, depending on the underlying assumptions (Clarke, 1973;Ethier 1973;Franke, 1991 among others) A number of empirical studies have also been conducted on the relationship between exchange rate volatility and trade (Caballero and Corbo, 1989;Asseery and Peel, 1991;Kroner and Lastrapes, 1993;De Arcangelis and Pensa, 1997;Rahman and Serletis, 2009;Zakaria, 2013 among others). Similar to the theoretical literature, the empirical results are often mixed depending on the measure of exchange rate volatility used; the time dimension of exchange rate volatility, i.e.…”

Section: Literature Reviewmentioning

confidence: 99%

“…It incorporates the concept of asymmetric volatility discussed in Engle and Ng (1993) and the use of propositions of Engle and Kroner, (1995) discussed in Elder (1995 and. Following Elder, (1995 and) (see also Rahman and Serletis, 2009), we present the dynamics of the structural VAR to represent the interrelations of South African REER volatility and changes in exports in the structural system. This representation ensures that the conditional mean of exports is dependent on the conditional standard deviation of real exchange rate shown as:…”

Section: The Empirical Modelmentioning

confidence: 99%

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The Impact of Exchange Rate Uncertainty on Exports in South Africa

Aye

Gupta

Moyo

et al. 2015

J. Intl Econ. Comm. Policy.

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This paper examines the impact of real effective exchange rate uncertainty on aggregate exports of South Africa for the period 1986Q4-2013Q2. Using a bivariate framework where the structural vector autoregression is modified to accommodate bivariate GARCH-in-Mean errors, we find that exchange rate uncertainty has a significant and negative effect on exports. Comparing the response of exports to a shock in exchange rate from a model that includes the real effective exchange rate uncertainty with results from a model that restricts the coefficient of the exchange rate uncertainty to zero, we find that the response is more pronounced in the former model. Furthermore, real exports respond asymmetrically to negative and positive shocks to real effective exchange rate shocks of the same size. JEL Codes: C32, E32, F1

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Section: Literature Reviewmentioning

confidence: 98%

Section: Literature Reviewmentioning

confidence: 99%

Section: The Empirical Modelmentioning

confidence: 99%

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The Impact of Exchange Rate Uncertainty on Exports in South Africa

Aye

Gupta

Moyo

et al. 2015

J. Intl Econ. Comm. Policy.

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“…The sensitivity of exchange rate regime of a country is of highly considerable fact to control the fluctuating consuming price of a basket of goods sold both in terms of domestic and export trading. Cao et al (2012) show the sensitivity of a currency that appears to play an important role in determining mark-up adjustment and the degree of pricing both to local and international markets (see also, Wang & Barrett, 2007;Tokarick, 2008;Rahman & Serletis, 2009). On the hand, Engle (2006) documents the optimization of pricing model in consideration with the importer's currency's fluctuating exchange rate while local prices are assumed to be stable.…”

Section: Introductionmentioning

confidence: 99%

Assessing the Exchange Rate Volatility as an External Shock to Chinese Economy

Azimi¹

2016

IJEF

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Theoretically, the rate of exchange is one of the major drivers of inflation that influences the wholesale price index (WPI) in countries where significant emphasis is put over import and export like China. In this paper, the exchange rate's clustering volatility and its impulsiveness as an external shock to WPI is investigated on a set of time series data which represents 4,067 daily observation of Chinese Economy from August 12, 2004-September 30, 2015. The ordinary least square and weighted regression analysis reveal significant p-values of 0.000 for exchange rate that explain the WPI throughout the stated period. The autoregressive conditional heteroskedasticity and generalized autoregressive conditional heteroskedasticity model exhibit significant probability value of 0.000 and 0.044 respectively for WPI and the exchange rate. It is found that the previous days' volatility of WPI influences the future volatility of WPI as an internal shock in addition to the previous days' impulsiveness of the exchange rate which influences the future volatility of the WPI as an external shock. The testing models are thoroughly applied and their stability and validity are evidenced thereto.

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“…Exchange rate volatility is found to have a dominant negative impact on exports in both the short run and the long run. Rahman and Serletis [11] interrogate the impact of exchange rate volatility on exports in the US using the multivariate GARCH-in-Mean vector autoregressive. The data are monthly for the period from 1973:1 to 2007:1.…”

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confidence: 99%

Exchange Rate Volatility and International Trade

Tsen

2014

J Stock Forex Trad

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There is a vast amount of studies on the impact of exchange rate volatility on international trade [1][2][3]. The rationale of examining the impact of exchange rate volatility on international trade is that exchange rate volatility induces uncertainty into international transactions. This uncertainty decreases international trade and economic welfare [4]. Nonetheless, the impact of exchange rate volatility on international trade is theoretically and empirically ambiguous. Theoretically, exchange rate volatility can have a negative impact or a positive impact on international trade [3]. Empirically, there is no general consensus about the impact of exchange rate volatility on international trade although various measures of exchange rate volatility, different data sets either aggregated data or disaggregated data and various statistical methods such as the cointegration analysis and the panel data analysis have been tried [5,6]. The impact of exchange rate volatility on international trade can be considered as a case-by-case basis. Thus, many studies have been carried-out to examine the impact of exchange rate volatility on international trade for developing, emerging and developed countries. Nevertheless, Ćorić and Pugh [2] investigate the impact of exchange rate volatility on international trade using a meta-regression analysis on a total of 49 studies for the period from 1978 to 2002. The results demonstrate that there is an adverse impact of exchange rate volatility on international trade. Besides, the negative impact of exchange rate volatility is mostly found for study using disaggregated data. This finding is particularly significant for developing countries where forward and future and options markets are less developed compared with those in developed countries.The standard export demand model is usually used to examine the impact of exchange rate volatility on exports whilst the standard import demand is used to examine the impact of exchange rate volatility on imports. The standard exports model is estimated as exports are a function of exchange rate, foreign income and exchange rate volatility. The standard imports model is estimated as imports are a function of exchange rate, domestic income and exchange rate volatility [7]. Alternatively, other proxy for explanatory variable is used in the standard export demand or the standard import demand model or other additional explanatory variable is included in the standard export demand or the standard import demand. For example, Hall, et al. [4] include the real export earnings of oil-exporters relative to the exports country as an additional explanatory variable in the standard export model. There are two popular measures of exchange rate volatility that are used to examine the impact of exchange rate volatility on international trade. One measure is exchange rate volatility that is expressed by the standard deviation or the moving average of standard deviation [3,4]. The other measure is exchange rate volatility that is expressed by an Autoregressive C...

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The effects of exchange rate uncertainty on exports

Cited by 46 publications

References 25 publications

The Impact of Exchange Rate Uncertainty on Exports in South Africa

The Impact of Exchange Rate Uncertainty on Exports in South Africa

Assessing the Exchange Rate Volatility as an External Shock to Chinese Economy

Exchange Rate Volatility and International Trade

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