Exchange Rate Fluctuations and Trade Flows : Evidence From the European Union

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 m...

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Main Author: Dell'Ariccia, Giovanni
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 1998, 1998
Series:IMF Working Papers; Working Paper
Subjects:
Emu
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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
Physical Description:27 p.
ISBN:9781451852950
1451852959