Estimating the Effects of Exchange Rate Volatility on Export Volumes
This paper takes a new empirical look at the long-standing question of the effect of exchange rate volatility on international trade flows by studying the case of Taiwan's exports to the United States from 1989-1998. In particular, we employ sectoral-level, monthly data and an innovative multiv...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Western Agricultural Economics Association
2007-08-01
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| Series: | Journal of Agricultural and Resource Economics |
| Subjects: | |
| Online Access: | https://ageconsearch.umn.edu/record/8643 |
| _version_ | 1818515361759232000 |
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| author | Kai-Li Wang Christopher B. Barrett |
| author_facet | Kai-Li Wang Christopher B. Barrett |
| author_sort | Kai-Li Wang |
| collection | DOAJ |
| description | This paper takes a new empirical look at the long-standing question of the effect of exchange rate volatility on international trade flows by studying the case of Taiwan's exports to the United States from 1989-1998. In particular, we employ sectoral-level, monthly data and an innovative multivariate GARCH-M estimator with corrections for leptokurtic errors. This estimator allows for the possibility that traders' forward-looking contracting behavior might condition the way in which exchange rate movement and associated risk affect trade volumes. Change in importing country industrial production and change in the expected exchange rate are found to jointly drive the trade volumes. More strikingly, monthly exchange rate volatility affects agricultural trade flows, but not trade in other sectors. These results differ significantly from those obtained using more conventional and restrictive modeling assumptions. |
| first_indexed | 2024-12-11T00:27:56Z |
| format | Article |
| id | doaj.art-6dec12da652943ce87854f13892335fe |
| institution | Directory Open Access Journal |
| issn | 1068-5502 2327-8285 |
| language | English |
| last_indexed | 2024-12-11T00:27:56Z |
| publishDate | 2007-08-01 |
| publisher | Western Agricultural Economics Association |
| record_format | Article |
| series | Journal of Agricultural and Resource Economics |
| spelling | doaj.art-6dec12da652943ce87854f13892335fe2022-12-22T01:27:29ZengWestern Agricultural Economics AssociationJournal of Agricultural and Resource Economics1068-55022327-82852007-08-0132222525510.22004/ag.econ.86438643Estimating the Effects of Exchange Rate Volatility on Export VolumesKai-Li WangChristopher B. BarrettThis paper takes a new empirical look at the long-standing question of the effect of exchange rate volatility on international trade flows by studying the case of Taiwan's exports to the United States from 1989-1998. In particular, we employ sectoral-level, monthly data and an innovative multivariate GARCH-M estimator with corrections for leptokurtic errors. This estimator allows for the possibility that traders' forward-looking contracting behavior might condition the way in which exchange rate movement and associated risk affect trade volumes. Change in importing country industrial production and change in the expected exchange rate are found to jointly drive the trade volumes. More strikingly, monthly exchange rate volatility affects agricultural trade flows, but not trade in other sectors. These results differ significantly from those obtained using more conventional and restrictive modeling assumptions.https://ageconsearch.umn.edu/record/8643agricultural tradeexchange rateexpectationsgarch |
| spellingShingle | Kai-Li Wang Christopher B. Barrett Estimating the Effects of Exchange Rate Volatility on Export Volumes Journal of Agricultural and Resource Economics agricultural trade exchange rate expectations garch |
| title | Estimating the Effects of Exchange Rate Volatility on Export Volumes |
| title_full | Estimating the Effects of Exchange Rate Volatility on Export Volumes |
| title_fullStr | Estimating the Effects of Exchange Rate Volatility on Export Volumes |
| title_full_unstemmed | Estimating the Effects of Exchange Rate Volatility on Export Volumes |
| title_short | Estimating the Effects of Exchange Rate Volatility on Export Volumes |
| title_sort | estimating the effects of exchange rate volatility on export volumes |
| topic | agricultural trade exchange rate expectations garch |
| url | https://ageconsearch.umn.edu/record/8643 |
| work_keys_str_mv | AT kailiwang estimatingtheeffectsofexchangeratevolatilityonexportvolumes AT christopherbbarrett estimatingtheeffectsofexchangeratevolatilityonexportvolumes |