Does exchange-rate volatility depress export flows: The case of LDCs

Arize, Augustine C.; Malindretos, John; Kasibhatla, Krishna M.

doi:10.1007/bf02295297

Cited by 71 publications

(45 citation statements)

References 49 publications

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“…These produce goods in large volume and export. This results in massive cash flows which affect XRs [12].…”

Section: Influence Of Macroeconomic Variables On Exchange Ratesmentioning

confidence: 99%

Influence of Macroeconomic Variables on Exchange Rates

Ramasamy¹,

Abar²

2015

JOEBM

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Abstract-Exchange rates play a significant role in international trade not only in fixing the prices but also in determining the nature of hedging to be arranged to avoid exchange rate risks. In this article we used three countries yearly exchange rates with their macroeconomic variables such as relative interest rates etc to study the impact they exert on exchange rates. We used bootstrapping technique to increase the sample size to run regression to study the effect. The previous researchers used general regression models to establish relationships but we have applied multi models by linking complementary variables to identify the best model. Our results showed that model B was robust which indicated all macroeconomic variables significantly influenced the exchange rates except employment and budget deficit. Most of the macroeconomic variables showed opposite sign contrary to the expectations and we concluded that the psychological factors like investor confidence dominate over economic variables in deciding exchange rate fluctuation.Index Terms-Bootstrapping, exchange rate, hedging, inflation rate, interest rate.

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“…These produce goods in large volume and export. This results in massive cash flows which affect XRs [12].…”

Section: Influence Of Macroeconomic Variables On Exchange Ratesmentioning

confidence: 99%

Influence of Macroeconomic Variables on Exchange Rates

Ramasamy¹,

Abar²

2015

JOEBM

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“…Therefore the empirical studies may include differences and reach different conclusions (Lindblad & Sellin, 2003). However, one point is almost universally accepted that uncertainties in exchange rates adversely affect the foreign trade (Pozo, 1992;Arize, Malindretos, & Kasibhata, 2003;Chowdhury, 1993;Kenen & Rodrik, 1986). Some studies in the literature point out that the uncertainty is considered as an opportunity by some companies (McKenzie & Brooks, 1997;Dellas & Zilberfarb, 1993).…”

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confidence: 99%

Time Series Analysis About The Relationship Between Foreign Trade and Exchange Rate in Turkish Economy

Kargi¹

2014

Timisoara Journal of Economics and Business

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In this study, the relationship between the foreign trade data and the exchange rate is tested using the monthly data for the period of 1992:01-2014:01 in Turkish Economy. The devaluation of local currency is expected to increase export while decreasing import rates, thus it will close the foreign trade deficit, theoretically. However, this effect is observed in varying degrees in the on both short and long terms. One of the most fundamental problems of the Turkish Economy is the foreign trade deficit, beside the Turkish Lira is a quite frequently fluctuating currency. The relationship between the foreign trade data and the exchange rate is an important topic to examine when the dependence of export to import is especially considered. In this study, the longterm relation between these two main variables and their causality are examined as using the time series analysis. Therefore, the tested hypothesis will be „there is a long term relationship between the exchange rate and the foreign trade in Turkish Economy“. It is was empirically observed that this hypothesis is correct as a result of the tests. It is also observed that there is Granger causality from the exchange rate to the exports, imports and net foreign trade in addition to the fact that the long term relationship exists between the foreign trade and the rate of exchange.

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“…Second, moving standard deviations of the exchange rate maintain the hypothesis of homoskedasticity while serving as a proxy for heteroskedastic risk in Chowdhury (1993), Arize, Osang, and Slottje (2000), and Arize, Malindretos, and Kasibhatla (2003). The present approach makes no such assumptions, improving upon models examining the relationship between means and variances as in Engle, Lilien, and Robins (1987) and Bollerslev, Chou, and Kroner (1992).…”

Section: Time Varying Variancesmentioning

confidence: 90%

“…BahmaniOskooee and Kara (2003) and Wilson and Tat (2001) use cointegration techniques to examine the effect of depreciation on exports and the trade balance but Arize, Malindretos, and Kasibhatla (2003) show this technique overestimates the effect of depreciation when there is a negative risk effect. The present paper simultaneously estimates the effects of depreciation and risk.…”

Section: Time Varying Variancesmentioning

confidence: 99%

Exchange rates, exchange risk, and Asian export revenue

Fang

Lai

Thompson

2007

International Review of Economics & Finance

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While depreciation may raise export revenue, associated exchange risk could offset any positive effect. The present paper investigates this net effect for eight Asian countries using a bivariate GARCH-M model that simultaneously estimates time varying risk. The fundamental result is that export markets react differently to exchange rates and associated risk. High degrees of risk apparently stimulate efforts to avoid its impact. Exchange risk has a dominating negative impact for the appreciating Japanese yen. Depreciation has no impact in Malaysia and Singapore, and exchange risk has a negative effect in Singapore. For the other five countries, depreciation stimulates export revenue but risk leads to a negative net effect in Taiwan.Depreciation lowers the foreign currency price of exports and should increase export quantity.Export revenue in domestic currency, however, may not rise and can fall. Perfectly inelastic foreign import demand would imply no increase in export revenue. If there is high import content in export production, depreciation could result in higher price of exports. With appreciation, exporters might price to market and lower their domestic currency price to maintain market share. Exporters may also actively hedge in option markets to avoid exchange rate effects.

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Does exchange-rate volatility depress export flows: The case of LDCs

Abstract: (JEL FI4, F31 )

Cited by 71 publications

References 49 publications

Influence of Macroeconomic Variables on Exchange Rates

Influence of Macroeconomic Variables on Exchange Rates

Time Series Analysis About The Relationship Between Foreign Trade and Exchange Rate in Turkish Economy

Exchange rates, exchange risk, and Asian export revenue

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