US trade and exchange rate volatility: A real sectoral bilateral analysis

Abstract

In this paper we consider the impact of exchange rate volatility on the volume of bilateral US trade (both exports and imports) using sectoral data. Amongst the novelties in our approach are the use of sectoral industrial price indices, rather than an aggregate price index, and the construction of the sectoral groupings, which is based on economic and econometric criteria. We find that separating trade into differentiated goods and homogeneous goods results in the most appropriate sectoral division, and we also report evidence to suggest that exchange rate volatility has a robust and significantly negative effect across sectors, although it is strongest for exports of differentiated goods.

The effect of real exchange rates and their volatilities on the selected agricultural commodity exports: A case study on Turkey, 1971-2010

“…Although most industries are not affected by the increased exchange rate volatility, the number of negatively affected industries (such as agriculture and textile) is much higher than of the positively affected ones. Byrne et al (2008) find that the exchange rate volatility has a negative impact on differentiated goods, especially on exports, and no significant effect on the homogenous goods by using the bilateral US trade flows (export-import) to six European countries. Ekanayake et al (2011) investigate the effects of the real exchange rate volatility on both export flows of South Africa to the European Union (EU) and imports from the EU by using quarterly data for the period of 1980-2009.…”

“…As discussed in the literature, it is important to use disaggregated data and/or data on the individual commodities to get more meaningful results on the size and magnitude of the effects of the real exchange rates on agricultural commodities trade. (Awokuse and Yuan 2006;Byrne et al 2008;Bahmani-Oskooee and Hegerty 2009;Karemera et al 2011). Byrne et al (2008) discuss the possibility of finding a negative effect of the exchange rate volatility on trade by pooling the data of all industries together, and claim that the disaggregation of the data such as firm, industry or commodity level could provide more appropriate and meaningful results.…”

“…(Awokuse and Yuan 2006;Byrne et al 2008;Bahmani-Oskooee and Hegerty 2009;Karemera et al 2011). Byrne et al (2008) discuss the possibility of finding a negative effect of the exchange rate volatility on trade by pooling the data of all industries together, and claim that the disaggregation of the data such as firm, industry or commodity level could provide more appropriate and meaningful results. Considering the individual sectors and/or commodities is vitally important to understand the exact nature of the relation and to further tailor effective policy measures based on these fine results.…”

Volatilidade Da Taxa De Câmbio E Seus Efeitos Sobre O Fluxo De Comércio Dos Países Da América Do Sul

“…As estimativas, tendo como base o modelo gravitacional, revelaram que os fluxos de comércio entre o Brasil e seus parceiros comerciais foram prejudicados pela volatilidade do câmbio para todos os setores analisados. Já Byrne et al (2008) identificaram os efeitos da volatilidade da taxa de câmbio sobre o volume de comércio bilateral dos Estados Unidos, considerando dois setores distintos, relacionados a bens homogêneos e a bens diferenciados. Os resultados mostraram que o efeito da volatilidade cambial foi negativo e estatisticamente significativo para produtos diferenciados, não tendo sido significativo para produtos homogêneos.…”

Exchange Rate Volatility, Financial Constraints, and Trade: Empirical Evidence from Chinese Firms

“…Even Rose (2000), who finds a very large effect of currency union on international trade, concludes to a small effect of exchange rate volatility. However, more recent works have emphasized that these results could be due both to an aggregation bias (Byrne et al, 2008;Broda and Romalis 1 , 2010) and an excessive focus on richer countries with highly developed financial markets since much more substantial negative effects of the exchange rate volatility on trade are found for developing countries (Grier and Smallwood, 2007).…”