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SOME FURTHER EVIDENCE ON EXCHANGE-RATE VOLATILITY AND EXPORTS

                                                                  George Hondroyiannis
                                                   Bank of Greece and Harokopio University

                                                                    P.A.V.B. Swamy U.S.
                                                              Bureau of Labor Statistics

                                                                         George Tavlas
                                                                       Bank of Greece

                                                                    Michael Ulan* U.S.
                                                                   Department of State
          

ABSTRACT

The relationship between exchange-rate volatility and aggregate export volumes for 12 industrial economies is examined using a model that includes real export earnings of oil-producing economies as a determinant of industrial-country export volumes. A supposition underlying the model is that, given their levels of economic development, oil-exporters’ income elasticities of demand for industrial-country exports might differ from those of industrial countries. Five estimation techniques, including a generalized method of moments (GMM) and random coefficient (RC) estimation, are employed on panel data covering the estimation period 1977:1-2003:4 using three measures of volatility. In contrast to recent studies employing panel data, we do not find a single instance in which volatility has a negative and significant impact on trade.

Keywords: Exchange-rate volatility; Trade; Random-coefficient estimation; Generalized method of moments; Panel

JEL classification: C23; F3; F31

Acknowledgements
We are grateful to Stephen Hall for helpful comments. The views expressed are those of the authors and should not be interpreted as those of their respective institutions.
*Retired

Correspondence:

George Tavlas,
Economic Research Department,
Bank of Greece,
21, E. Venizelos Ave.,
102 50 Athens, Greece
Tel. +30210-320 2370,
Fax +30210-320 2432
email: gtavlas@bankofgreece.gr


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