Why is it So Difficult to Find an Effect of Exchange Rate Risk on Trade?

Klaassen, Franc

doi:10.2139/ssrn.199903

Cited by 10 publications

(33 citation statements)

References 34 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…11 11 We adopt an AR model to forecast the exchange rate. This approach is consistent with previous studies in the literature, for example, Klaassen (2004). …”

supporting

confidence: 93%

“…As in Klaassen (2004) and Baum, Caglayan, and Ozkan (2004), we adopt the flexible lag version of the two‐country imperfect substitutes model of Goldstein and Khan (1985) for bilateral trade between Ireland and the United States and the United Kingdom in real terms. This allows for examining the decision‐making process of exporters under uncertainty for intertemporal multiperiod horizons.…”

Section: Methodsmentioning

confidence: 99%

“…Moving to the standard modeling of time variation, GARCH‐type processes have traditionally been applied (Klaassen 2004; Kroner and Lastrapes 1993). A large number of specifications are available with, for example, Kroner and Lastrapes (1993) using a GARCH‐in mean (GARCH‐M) process, whereas Klaassen (2004) uses a GARCH(1, 1) model. All these models have a common feature in modeling clustering of second moments.…”

Section: Methodsmentioning

confidence: 99%

“…12 12 See Klaassen (2004) for a detailed discussion of the problems associated with geometric and polynomial lags in the current setting. …”

mentioning

confidence: 99%

See 3 more Smart Citations

Volatility and Irish Exports

Bredin

Cotter²

2008

Economic Inquiry

View full text Add to dashboard Cite

We analyse the impact of volatility per se on exports for a a small open economy concentrating on Irish trade with the UK and the US. An important element is that we take account of the time lag between the trade decision and the actual trade or payments taking place by using a flexible lag approach. Rather than adopt a single measure of risk we also adopt a spectrum of risk measures and detail varied size characteristics and statistical properties. We find that the ambiguous results found to date may well be due to not taking account of the timing effect which varies substantially depending on which volatility measure is used. However, the foreign exchange volatility effect is consistently positive, indicating the dominance of exporters expectations of possible profitable opportunities from future cash flows. The potential negative aspects of trade, the entry and exit costs, are accounted for by a negative influence of income volatility on trade.

show abstract

“…11 11 We adopt an AR model to forecast the exchange rate. This approach is consistent with previous studies in the literature, for example, Klaassen (2004). …”

supporting

confidence: 93%

Section: Methodsmentioning

confidence: 99%

Section: Methodsmentioning

confidence: 99%

“…12 12 See Klaassen (2004) for a detailed discussion of the problems associated with geometric and polynomial lags in the current setting. …”

mentioning

confidence: 99%

See 2 more Smart Citations

Volatility and Irish Exports

Bredin

Cotter²

2008

Economic Inquiry

View full text Add to dashboard Cite

show abstract

“…The second measure (MASD) captures the movements of exchange rate uncertainty over time. The main characteristic of this measure is its ability to capture the higher persistence of real exchange rate movements (Klaassen, 2004). This measure defines exchange rate volatility as: where e ijt is the log bilateral exchange rate, and m is the order of moving average.…”

Section: Methodsmentioning

confidence: 99%

Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies

2010

View full text Add to dashboard Cite

Exchange rate uncertainty and trade growth?a comparison of linear and non-linear (forecasting) models

Herwartz

Weber²

2005

Appl. Stochastic Models Bus. Ind.

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract A huge body of empirical and theoretical literature has emerged on the relationship between foreign exchange (FX) uncertainty and international trade. Empirical findings about the impact of FX uncertainty on trade figures are at best weak and often ambiguous with respect to its direction. Almost all empirical contributions assume and estimate a linear relationship. Possible nonlinearity or state dependence of causal links between FX uncertainty and trade has been mostly ignored yet. In addition, widely used regression models have not been evaluated in terms of ex-ante forecasting. In this paper we analyze the impact of FX uncertainty on sectoral categories of multilateral exports and imports for 15 industrialized economies. We particularly provide a comparison of linear and nonlinear models with respect to ex-ante forecasting. In terms of average ranks of absolute forecast errors nonlinear models outperform both, a common linear model and some specification building on the assumption that FX uncertainty and trade growth are uncorrelated. Our results support the view that the relationship of interest might be nonlinear and, moreover, lacks of homogeneity across countries, economic sectors and when contrasting imports vs. exports. Terms of use: Documents in

show abstract

Why is it So Difficult to Find an Effect of Exchange Rate Risk on Trade?

Cited by 10 publications

References 34 publications

Volatility and Irish Exports

Volatility and Irish Exports

Exchange Rate Volatility and Exports: New Empirical Evidence from the Emerging East Asian Economies

Exchange rate uncertainty and trade growth?a comparison of linear and non-linear (forecasting) models

Contact Info

Product

Resources

About