US exports and time-varying volatility of real exchange rate

Sukar, Abdulhamid; Hassan, Seid Y.

doi:10.1016/s1044-0283(01)00020-5

Cited by 32 publications

(14 citation statements)

References 29 publications

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“…The empirical studies that fall in the second category by showing a negative relationship between exchange rate volatility and international trade include Mougoué and Aggarwal (2011); Mukherjee and Pozo (2011); Spronk et al (2013); Serenis and Tsounis (2013); Byrne et al (2008); Schnabl (2008); Sukar and Hassan (2001); Bahmani-Oskooee (2002). In general, these studies highlighted that the fluctuations in the exchange rate of the host country can adversely affect the trading activity and ultimately the trading volume can be decreased.…”

Section: Exchange Rate Volatility and International Tradementioning

confidence: 99%

The Effect of Exchange Rate Volatility on International Trade and Foreign Direct Investment (FDI) in Developing Countries along “One Belt and One Road”

Lefen

2018

IJFS

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The “One Belt and One Road” (OBOR) project was started by the Chinese government with the aim of achieving sustainable economic development and increasing cooperation with other countries. This project has five major objectives, which include (i) increasing trade flow, (ii) encouraging policy coordination, (iii) improving connectivity, (iv) obtaining financial integration, and (v) fortifying closeness between people. This paper aims to analyze the effect of exchange rate volatility on international trade and foreign direct investment (FDI) in developing countries along “One Belt and One Road”. We selected seven developing countries which are part of this project, namely Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. We collected panel data for the period 1995 to 2016 from the U.S. Heritage Foundation, International Financial Statistics (IFS) (a database developed by the International Monetary Fund), and World Development Indicators (WDI) (a database developed by the World Bank). We applied Generalized Autoregressive Conditional Heteroscedasticity (GARCH) (1,1) and threshold-Generalized Autoregressive Conditional Heteroscedasticity (TGARCH) (1,1) models to measure the exchange rate volatility. Furthermore, we employed a fixed effect model to analyze the relationship of exchange rate volatility with international trade and FDI. The results of this paper revealed that exchange rate volatility affects both international trade and FDI significantly but negatively in OBOR-related countries, which correlates with the economic theory arguing that exchange rate volatility may hurt international trade and FDI. It can be concluded that exchange rate volatility can adversely affect international trade and FDI inflows in OBOR-related countries.

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Section: Exchange Rate Volatility and International Tradementioning

confidence: 99%

The Effect of Exchange Rate Volatility on International Trade and Foreign Direct Investment (FDI) in Developing Countries along “One Belt and One Road”

Lefen

2018

IJFS

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“…Some studies show that the Dickey-Fuller tests have low power in distinguishing between the null and the alternative hypothesis. These studies suggest performing tests of the null hypothesis of mean stationarity against an alternative of a unit root in order to decide whether the time series data are stationary or integrated (Sukar and Hassan, 2001). Thus, KPSS unit root test uses Lagrange Multiplier (LM) statistic for testing the null hypothesis of the time series is stationary around a deterministic trend against the alternative hypothesis of nonstationary.…”

Section: Unit Root Testmentioning

confidence: 99%

Factors Affecting Current Account Balance of Turkey: A Survey With the Cointegrating Regression Analysis

Özdamar¹

2015

Pressacademia

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In Turkish economy, especially in recent years, ratio of current account deficits to national income is considerably high. Interrelations between current account balance and other macroeconomic indicators make it important to investigate which factors to what extent affect the current account balance in terms of economic policy decisions. In this study, the relationships between current account balance and various macroeconomic variables in Turkish economy are investigated empirically with Johansen cointegration test and with cointegrating regression analyses (FMOLS, CCR and DOLS) for the 1994-2014 period. It is found that foreign trade balance is a strong explanatory of the current account balance; terms of trade and gross domestic product also have statistically significant effects on the current balance. According to the results Harberger-Laursen-Metzler (HLM) hypothesis seems to be valid for Turkey. Besides, results of the study reveal that domestic interest rates and real effective exchange rate affects Turkey's current account balance as expected but these variables are found to be insignificant.

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“…Equilibrium price and quantity are determined by the interaction of supply and demand. Usually the assumption of infinitely elastic export supply and so exogenous own export price is made in previous empirical studies; see Arize (1995), Sukar and Hassan (2001), Bredin et al (2003) and de Vita and Abbott (2004) among others. In this paper, we pursue these studies and draw on Boug et al (2006) who provide evidence that Norwegian exporters of machinery and equipment follow much more closely the prices of competitors than domestic costs in setting their export prices.…”

Section: The Economic Backgroundmentioning

confidence: 99%

“…Moreover, as assessed by Pagan and Ullah (1988), they are likely to suffer from the measurement error problem and as such produce biased estimates of the impact of risk on the decision making of economic agents. An alternative volatility measure used with increasing frequency -which does not suffer from these shortcomings − is based on the autoregressive conditional heteroscedasticity (ARCH) model introduced by Engle (1982) and extended versions, see Kroner and Lastrapes (1993), Caporale and Doroodian (1994), Lee (1999), Sukar and Hassan (2001) and Choudhry (2005) among others. Indeed, ARCH based measures of volatility are likely to produce consistent estimates of parameters of interest in (2), but potentially inefficient ones due to the generated regressor problem, cf.…”

Section: The Measure Of Exchange Rate Volatilitymentioning

confidence: 99%

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Exchange rate volatility and export performance: a cointegrated VAR approach

Boug

Fagereng

2010

Applied Economics

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Abstract:During the last decades Norwegian exporters have − despite various forms of exchange rate targeting − faced a rather volatile exchange rate which may have influenced their behaviour. Recently, the shift to inflation targeting and a freely floating exchange rate has brought about an even more volatile exchange rate. We examine the causal link between export performance and exchange rate volatility across different monetary policy regimes within the cointegrated VAR framework using the implied conditional variance from a GARCH model as a measure of volatility. Although treating the volatility measure as either a stationary or a non-stationary variable in the VAR, we are not able to find any evidence suggesting that export performance has been significantly affected by exchange rate uncertainty. We find, however, that volatility changes proxied by blip dummies related to the monetary policy change from a fixed to a managed floating exchange rate and the Asian financial crises during the 1990s enter significantly in a dynamic model for export growth − in which the level of relative prices and world market demand together with the level of exports constitute a significant cointegration relationship. A forecasting exercise on the dynamic model rejects the hypothesis that increased exchange rate volatility in the wake of inflation targeting in the monetary policy has had a significant impact on export performance.

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US exports and time-varying volatility of real exchange rate

Cited by 32 publications

References 29 publications

The Effect of Exchange Rate Volatility on International Trade and Foreign Direct Investment (FDI) in Developing Countries along “One Belt and One Road”

The Effect of Exchange Rate Volatility on International Trade and Foreign Direct Investment (FDI) in Developing Countries along “One Belt and One Road”

Factors Affecting Current Account Balance of Turkey: A Survey With the Cointegrating Regression Analysis

Exchange rate volatility and export performance: a cointegrated VAR approach

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