SOME FURTHER EVIDENCE ON EXCHANGE-RATE VOLATILITY AND EXPORTS
Bank of Greece and Harokopio University
P.A.V.B. Swamy U.S.
Bureau of Labor Statistics
Bank of Greece
Michael Ulan* U.S.
Department of State
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
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.
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