A New Look at Exchange Rate Volatility and Trade Flows

Occasional Papers, September 30, 2004

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A New Look at Exchange Rate Volatility and Trade Flows

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Bibliographic details

• Authors: Peter B. Clark, Shang-Jin Wei, Natalia T. Tamirisa, Azim M Sadikov, Li Zeng
• Published: September 30, 2004
• Series: Occasional Papers
• DOI: https://doi.org/10.5089/9781589063587.084

Overview

• Title: A New Look at Exchange Rate Volatility and Trade Flows
• Authors: Peter B. Clark, Shang-Jin Wei, Natalia T. Tamirisa, Azim M Sadikov, Li Zeng
• Date: September 30, 2004
• Short summary:
  • Revisits the effect of exchange rate volatility on trade flows, updating a 1984 IMF study on G-7 countries.
  • Considers developments over the past two decades that may have altered the relationship between exchange rate volatility and trade flows, including currency crises in the 1990s, increasing cross-border capital flows, and a deepening market in foreign exchange hedging instruments.
  • Employs recent advances in economic theories on trade and in statistical methodologies.
  • Examines effects on developing and transition economies, as well as on developed countries.

Key Findings (as described in the summary)

• Historical context:
  • The effect was previously examined by a 1984 IMF study on G-7 countries.
• Developments potentially increasing volatility’s impact:
  • Currency crises in the 1990s.
  • Increasing cross-border capital flows.
• Developments potentially reducing volatility’s impact:
  • Deepening of the market in foreign exchange hedging instruments.
• Methodological approach:
  • Uses recent advances in economic theories on trade and in statistical methodologies.
• Coverage:
  • Examines effects across developing economies, transition economies, and developed countries.

Scope, Subjects, and Keywords

• Subject terms:
  • Exchange rate arrangements, Exchange rates, Foreign exchange, International trade, International trade organizations, Nominal effective exchange rate, Plurilateral trade, Real effective exchange rates, Real exchange rates
• Keywords:
  • Africa, Central and Eastern Europe, country, exchange rate, Exchange rate arrangements, exchange rate fluctuation, exchange rate movement, exchange rate uncertainty, exchange rate variability, exchange rate volatility, Exchange rates, Global, International trade organizations, Middle East, Nominal effective exchange rate, nominal exchange rate, OP, Plurilateral trade, Real effective exchange rates, Real exchange rates, trade, volatility measure, Western Hemisphere

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• A New Look at Exchange Rate Volatility and Trade Flows
  • A New Look at Exchange Rate Volatility and Trade Flows (Markdown version)
  • A New Look at Exchange Rate Volatility and Trade Flows (PDF)