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Exchange Rate Volatility and Trade: External Exchange Rate Volatility Matters

Exchange Rate Volatility and Trade: External Exchange Rate Volatility Matters We investigate the role of external exchange rate volatility in export in addition to the effect of bilateral exchange rate volatility using country-, sector-, and destination-specific detailed export data of the World Bank Exporter Dynamics Database. The results show that while the bilateral exchange rate volatility has a depressing effect on export, the external exchange rate volatility generates trade-promoting effect on export. However, the magnitude of the effect depends on trade intensity between countries. Furthermore, while the role of external exchange rate volatility diminished after the Global Financial Crisis, the effect of its volatility has become larger. Finally, external exchange rate volatility has a larger trade-promoting effect on export in the presence of high volatilities than the effect in the presence of low volatilities. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of International Commerce, Economics and Policy World Scientific Publishing Company

Exchange Rate Volatility and Trade: External Exchange Rate Volatility Matters

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Publisher
World Scientific Publishing Company
ISSN
1793-9933
eISSN
1793-9941
DOI
10.1142/S1793993320500064
Publisher site
See Article on Publisher Site

Abstract

We investigate the role of external exchange rate volatility in export in addition to the effect of bilateral exchange rate volatility using country-, sector-, and destination-specific detailed export data of the World Bank Exporter Dynamics Database. The results show that while the bilateral exchange rate volatility has a depressing effect on export, the external exchange rate volatility generates trade-promoting effect on export. However, the magnitude of the effect depends on trade intensity between countries. Furthermore, while the role of external exchange rate volatility diminished after the Global Financial Crisis, the effect of its volatility has become larger. Finally, external exchange rate volatility has a larger trade-promoting effect on export in the presence of high volatilities than the effect in the presence of low volatilities.

Journal

Journal of International Commerce, Economics and PolicyWorld Scientific Publishing Company

Published: Jun 27, 2020

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