DOES EXCHANGE RATE VOLATILITY AFFECT TRADE? EVIDENCE FROM SEVERAL EUROPEAN COUNTRIES

• Main Author: Nikiforos Laopodis
• Format: Article
• Language: English
• Published: People & Global Business Association (P&GBA) 2001-03-01
• Series: Global Business and Finance Review
• Subjects: exchange rate; european monetary system; volatility
• Online Access: http://www.gbfrjournal.org/pds/journal/thesis/20150624172448-05KGW.pdf

The paper exwnines lllietlier exchange rate 1•0/a1i/ity had affected negatii•e/y the trade flows bilateralfr between Belgium. France. Greece. Ita(v. Netherlands. Portugal. Spain, the United Kingdom and German.) since the inception of the European Monetary System in J979. The exchange rate volatility variable is derive~/ from the Exponential Generali::ed Autoregressive Conditionally Heteroskedastic in-Mean model. This variable is next used as a pro.\) f()J· exchange rnte uncertainty in an error-correc.:tion model in order 10 investigate its impact on a count1ys import .flows fi-0111 Germany, along with several other variables. The results indicate that short-run volatility did not have any deleterious effects on the volume of bilateral trade. despite thefact that exchange rnle volatility had increased noticeably/or most cifthe exchange rates.