Exchange Rate Fluctuations and Trade Flows: Evidence From the European Union
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
This paper analyzes the effects of exchange rate volatility on bilateral trade flows. Through use of a gravity model and panel data from western Europe, exchange rate uncertainty is found to have a negative effect on international trade. The results seem to be robust with respect to the particular measures representing exchange rate uncertainty. Particular attention is reserved for problems of simultaneous causality. The negative correlation between trade and bilateral volatility remains significant after controlling for the simultaneity bias. However, a Hausman test rejects the hypothesis of the absence of simultaneous causality.
Series:
Working Paper No. 1998/107
Subject:
Currencies Exchange rates Foreign exchange International trade Money Plurilateral trade Real exchange rates Trade balance
English
Publication Date:
August 1, 1998
ISBN/ISSN:
9781451852950/1018-5941
Stock No:
WPIEA1071998
Pages:
27
Please address any questions about this title to publications@imf.org