Exchange rate volatility and international trade

Lal, Madan; Kumar, Satish; Pandey, Dharen Kumar; Kumar, Varun; Lim, Weng Marc

doi:10.1016/j.jbusres.2023.114156

Cited by 17 publications

(9 citation statements)

References 162 publications

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“…(2) Impurity Reduction: To measure the impurity reduction due to a feature (e.g., RER), we calculate a weighted average of impurity reductions over all the nodes where the feature is used for splitting. It is defined as MDI(RER) = ∑ (w j * [Impurity(node j ) − w le f t * Impurity(le f t child j ) − w right * Impurity(right child j )]) (9) where j iterates over all nodes where the feature (RER) is used for splitting. w j is the weighted fraction of data points in node j .…”

Section: Feature Importance Evaluation Methodsmentioning

confidence: 99%

“…(2) Resource Misallocation: A notable consequence highlighted in the literature is the potential for resource misallocation. Lal et al [9] argue that short-term exchange rate fluctuations can lead companies to adjust production and investment decisions based on immediate currency movements rather than long-term economic fundamentals. This misallocation can result in suboptimal resource utilization, hindering overall productivity and economic growth.…”

Section: Real Exchange Rate Fluctuations and Trade Balancementioning

confidence: 99%

“…These fluctuations may elevate transaction costs, potentially eroding the benefits derived from international trade [6][7][8]. Moreover, they may lead to resource misallocation, prompting companies to adjust production and investment based on shortterm exchange rate fluctuations rather than long-term fundamentals, thereby hampering productivity and economic growth [9]. Despite studies suggesting positive effects under specific conditions [10][11][12][13], others have faced challenges in identifying clear effects [14][15][16][17][18][19].…”

Section: Introductionmentioning

confidence: 99%

“…The impact of exchange rate fluctuations on trade flows can manifest as symmetric or asymmetric [9,20,21], with the latter being more reasonable in practice due to divergent expectations and reactions among traders to currency appreciation and depreciation [22][23][24][25].…”

Section: Introductionmentioning

confidence: 99%

See 3 more Smart Citations

Influence Analysis of Real Exchange Rate Fluctuations on Trade Balance Data Using Feature Important Evaluation Methods

Kim,

2024

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This study delves into the intricate relationship between fluctuations in the real exchange rate and the trade balance, situated within the framework of a ‘two-country’ trade theory model. Despite a wealth of prior research on the impact of exchange rates on international trade, the precise extent of this influence remains a contentious issue. To bridge this gap, our research adopts a pioneering approach, employing three distinct artificial intelligence-based influence measurement methods: Mean Decrease Impurity (MDI), Permutation Importance Measurement (PIM), and Shapley Additive Explanation (SHAP). These sophisticated techniques provide a nuanced and differentiated perspective, enabling specific and quantitative measurements of the real exchange rate’s impact on the trade balance. The outcomes derived from the application of these innovative methods shed light on the substantial contribution of the real exchange rate to the trade balance. Notably, the real exchange rate (RER) emerges as the second most influential factor within the ‘two-country’ trade model. This empirical evidence, drawn from a panel dataset of 78 nations over the period 1992–2021, addresses crucial gaps in the existing literature, offering a finer-grained understanding of how real exchange rates shape international trade dynamics. Importantly, our study implies that policymakers should recognize the pivotal role of the real exchange rate as a key determinant of trade flow.

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Section: Feature Importance Evaluation Methodsmentioning

confidence: 99%

Section: Real Exchange Rate Fluctuations and Trade Balancementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Influence Analysis of Real Exchange Rate Fluctuations on Trade Balance Data Using Feature Important Evaluation Methods

Kim,

2024

Information

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“…Another emerging theme in the literature involves examining the impact of exchange rate volatility on trade balance. Lal, Kumar, Pandey, Rai, and Lim (2023) assert that this volatility affects exporters, sectors, and regions differently, highlighting its nuanced impact. Bosupeng, Naranpanawana, and Su (2024) contribute to this discourse by demonstrating that, generally, volatility diminishes the positive effects of an appreciation shock on the trade balance in developed countries, both in the short and long term.…”

Section: Empirical Evidencementioning

confidence: 99%

Dynamic of Brazilian Foreign Trade by Technological Intensity

Machado Neto,

Arruda,

Brito

2024

IJEF

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This paper aims to investigate the long-run relationship between the real exchange rate and the Brazilian trade balance disaggregated by technological intensity classification, i.e., High Tech, Medium-High Tech, Medium Low Tech, and Low Tech, using monthly data from the period of January 2000 to December 2022. To achieve this aim, time-varying cointegration methodology is used, as it is understood that a linear approach is not well suited for developing economies, that face much influence from external events and internal turmoils, which is just the case of Brazil. It was found that, from the 4 sectors, only the low-tech sector has the usually expected signals, that is, a benefit from exchange depreciation, but even for this industry, this positive effect has been diminishing since 2009, due to structural changes in the Brazilian agricultural sector, which accounts for much of the added value in the low-tech goods. The dynamic real exchange rate elasticities for the medium-high and medium-low tech industries oscilated much throughout the time frame of the study, revealing the great influence of external and internal shocks in the change of the trajectory of these elasticities. The high-tech sector presented opposite signals in the estimated elasticities, revealing that exchange rate appreciations benefit it, probably due to its dependency on imported inputs.

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International trade and investment: A review and research agenda

Singh,

Keshari,

Gautam

2024

Glob Bus Org Exc

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International trade and investment have always been an epicenter of research, and with the onset of the COVID‐19 pandemic, a surge in the publication of review articles focusing on different facets of trade and investment has been observed, but a comprehensive retrospective review of international trade and investment remains scarce. To address this gap, a systematic literature review of 30 articles published in A* and A ranked journals, along with performance analysis and science mapping of 720 articles retrieved from Scopus and Web of Science databases using bibliometric analysis is done. Considering the dynamic nature of international trade and investment, the relationship between export policies and international trade influences the global landscape, which fosters mutually beneficial relationships leading to economic cooperation. Capitalizing on opportunities and mitigating risks associated with international investment is crucial for maintaining sustainable international business operations. Through these interconnected relationships, the research contributes to the understanding of the interdependent forces shaping the global economic paradigm in a unified manner. Moreover, the study provides future research directions and questions which are culled from the analysis and offer potential advancements in the field of international trade and investment.

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Exchange rate volatility and international trade

Cited by 17 publications

References 162 publications

Influence Analysis of Real Exchange Rate Fluctuations on Trade Balance Data Using Feature Important Evaluation Methods

Influence Analysis of Real Exchange Rate Fluctuations on Trade Balance Data Using Feature Important Evaluation Methods

Dynamic of Brazilian Foreign Trade by Technological Intensity

International trade and investment: A review and research agenda

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