Asymmetric Exchange Rate Effects on Cross-Border Freight Flows between the United States and Canada

Chi, Junwook

doi:10.1177/0361198120912242

Cited by 4 publications

(6 citation statements)

References 30 publications

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“…Furthermore, the link between price volatility and international flows of goods in countries with "commodity currency" (Hegerty, 2016) indicates that for them, cross-border trade is more responsive to adjustments in prices (higher price elasticity) than others, possibly displaying asymmetric effects in trade flows (Belke et al, 2015). In line with findings from previous studies regarding the possible presence of asymmetric effects in ERV (Chi, 2020;Fang et al, 2009;Sharma and Pal, 2018), our study aims to test whether such effects occur for the case of Indonesia and its top ten trade partners, with respect to both exports and imports. The ten largest trade partners of Indonesia are China, the USA, Singapore, South Korea, Japan, India, Malaysia, Australia, Germany, the Netherlands (top only in exports) and Brazil (top only in imports).…”

Section: Introductionsupporting

confidence: 87%

“…Similar equations are proposed as general models to estimate export and import demand and are further modified to study the effects of asymmetric ERV in bilateral trade in cases like Tunisia, India and Mexico, as in the empirical evidence provided by Arize et al (2017), Bahmani-Oskooee and Nouira (2020), Chi (2020) and Sharma and Pal (2018).…”

Section: Methodsmentioning

confidence: 99%

“…The literature also shows mixed results when it comes to the short- or long-run impacts. Some studies find stronger effects from ERV in the short run (Asteriou et al , 2016; Bahmani-Oskooee and Nouira, 2020), compared to the long run (Chi, 2020; Sharma and Pal, 2018), while few find ERV persistent in both the short and the long run (Bahmani-Oskooee et al , 2017). Ambiguity is also exhibited when studies are restricted to specific commodities or industries (Bahmani-Oskooee and Aftab, 2017); when the levels of economic development among partners differ (Chi and Cheng, 2016); when traders have limited hedging instruments available (Aghion et al , 2009); when partners differ in risk behaviour (De vita and Abbott, 2004); and when it comes to capturing economic shocks (Fitrianti, 2017).…”

Section: Introductionmentioning

confidence: 99%

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Exchange rate volatility and trade flows in Indonesia and ten main trade partners: asymmetric effects

Heriqbaldi

Esquivias

Handoyo

et al. 2022

SEF

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Purpose This paper aims to examine whether Indonesian cross-border trade responds asymmetrically to exchange rate volatility (ERV). Design/methodology/approach An exponential generalized autorgressive conditional heteroscedasticity model is applied to estimate the ERV of Indonesia and ten main trade partners using quarterly data from 2006 to 2020. A nonlinear autoregressive distributed lag estimation is applied to estimate the impact of ERV on cross-border trade. Impacts from the global financial crisis (GFC) of 2008 and the COVID-19 pandemic are covered. Dynamic panel data is used for the robustness test. Findings In the short-run, ERV significantly affects exports to most of the top partners (positively, negatively or both). In the long run, asymmetric effects occur in Indonesia’s exports to five top destinations. The weakening of the Indonesian Rupiah mainly supports exports in the short term. Imports from top partners are also affected by ERV in both the short run and, to a lesser extent, in the long run. Both the GFC and the COVID-19 pandemic reduced trade: for most cases, in the short run. The dynamic panel model suggests that ERV has asymmetric impact on cross-border trade in the long run. Practical implications Exchange rate strategies need to avoid a single-side policy approach and, instead, account for exporter and importer differences in risk behaviour and an asymmetric response to ERV in trade. Policymakers need to consider policies that stabilise the currency. Originality/value This study provides evidence that cross-border trade can react asymmetrically to the exchange rate uncertainty and that the impacts of real ERV are asymmetric as well. The authors also apply a dynamic panel that signals that ERV matters in the long run for Indonesian trade with top partners.

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Section: Introductionsupporting

confidence: 87%

Section: Methodsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Exchange rate volatility and trade flows in Indonesia and ten main trade partners: asymmetric effects

Heriqbaldi

Esquivias

Handoyo

et al. 2022

SEF

View full text Add to dashboard Cite

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“…The study suggested using aggregated data using mean-regression methods, ignoring firm-specific factors to explain mixed results as in the literature. Chi (2020) performed a study to investigate the possible asymmetric exchange rate effects on cross-border freight flows between the United States and Canada. Linear and nonlinear auto regressive distributed lag models have been used to analyze the data.…”

Section: Literature Reviewmentioning

confidence: 99%

Effects of Real Exchange Rate Volatility on Trade: Empirical Analysis of the United States Exports to BRICS

Ekanayake

Dissanayake

2022

JRFM

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This paper analyzes the effects of real exchange rate volatility on the United States’ exports to BRICS. It focuses on the top 20 export products (defined by the 2-digit Harmonized System codes) from the United States to Brazil, Russia, India, China, and South Africa, and uses quarterly data for period from 1993Q1 to 2021Q2. The specified panel regression model was first estimated using three estimation methods, namely, the Panel Least Squares, the Panel Fully Modified Least Squares (FMOLS), and Panel Dynamic Least Squares (DOLS). In addition, to estimate the short-run and long-run effects of real exchange rate volatility on exports, it also uses the method of the Autoregressive Distributed Lag (ARDL) approach to cointegration analysis and error-correction models. Two measures of exchange rate volatility are used in this study. According to our findings, the levels of foreign economic activity have a positive effect on exports while the real exchange rate has a negative effect on exports. In addition, exchange rate volatility has a negative effect on exports in the long run in all five countries. However, the effects of exchange volatility are found to yield mixed results in the short run regardless of which measure of exchange rate volatility was used.

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“…The impact of exchange rate volatility was also found in the short and long run in a US-China context (Hurley & Papanikolaou, 2021). Chi (2020) found that exchange rate volatility has an asymmetric effect on the freight flows between the United States and Canada.…”

Section: Literature Reviewmentioning

confidence: 91%

Post-Brexit exchange rate volatility and its impact on UK exports to eurozone countries: A bounds testing approach

Khoury

Lorenzo

et al. 2023

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Research background: The Brexit referendum had a profound effect on the economic relations between the United Kingdom (UK) and continental Europe. Major economic and financial determinants were affected, including the impact of the GBP/EUR exchange rate volatility on the dynamics of UK exports to the Eurozone. Purpose of the article: This paper seeks to assess the extent to which these dynamics have changed since Brexit and to estimate the magnitude of their impact. Methods: To this end, the volatility behavior of the GBP/EUR exchange rate before and after Brexit is captured using EWMA, GARCH(p,q), and EGARCH(p,q) models for the period of January 1, 2010 to August 31, 2020. The post-Brexit change in the volatility structure of GBP/EUR exchange rates is then tested by including a dummy in the optimal volatility model. Finally, the Autoregressive Distributed Lag (ARDL) Bounds Testing approach is employed to analyze the relationships between exchange rate volatility and exports. Findings & value added: GARCH(1,1) was selected as the winning model and used to examine the volatility structure of the post-Brexit exchange rate, which revealed no significant change. By incorporating a well-grounded proxy for exchange rate volatility into the demand function of exports, and controlling for the industrial production index, terms of trade, and real exchange rate, the analysis showed that exchange rate volatility had a negative impact on export volume to the Eurozone in both the long and short run. Additionally, the industrial production index had a positive effect on export volume in both the long and short run, while an appreciation in the value of the pound relative to the euro adversely affected the competitiveness of UK exports in the Eurozone market in the long run, with no impact in the short run. This paper serves as a benchmark for future studies, as it follows a three-step modeling approach and provides valuable insights into the potential economic and financial consequences a European Union (EU) member state may face should it choose to exit the EU.

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Asymmetric Exchange Rate Effects on Cross-Border Freight Flows between the United States and Canada

Cited by 4 publications

References 30 publications

Exchange rate volatility and trade flows in Indonesia and ten main trade partners: asymmetric effects

Exchange rate volatility and trade flows in Indonesia and ten main trade partners: asymmetric effects

Effects of Real Exchange Rate Volatility on Trade: Empirical Analysis of the United States Exports to BRICS

Post-Brexit exchange rate volatility and its impact on UK exports to eurozone countries: A bounds testing approach

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