| Preface |
| |
| Executive Summary |
| |
| I. |
Introduction and Overview |
| |
| II. |
Brief Review of the Theoretic and Empirical Literature |
| |
A. |
Theoretical Aspects of the relationship Between Exchange Rate Volatility and Trade |
| |
B. |
Empirical Results on the Relationship Between Exchange rate Volatility and Trade |
| |
| III. |
Recent History and Geography of Exchange Rate Volatility |
| |
A. |
Measuring Exchange Rate Volatility |
| |
B. |
Comparisons Using the Benchmark Measure of Volatility |
| |
C. |
Alternative Measures of Volatility |
| |
| IV. |
New Evidence on the Effect of Exchange Rate Volatility on Trade |
| |
A. |
Aggregate Volatility and Aggregate Trade—A First Look |
| |
B. |
The Conceptual Framework for the Analysis of the Volatility Effect in Trade |
| |
C. |
What Do the Data Tell Us? |
| |
| V. |
Summary and Concluding Remarks |
| |
| Appendix: Do Countries with Stable Exchange
Rates and Common Currency Trade More? An Empirical Analysis |
| I. |
The Gravity Model |
| |
A. |
Aggregate Trade |
| |
B. |
Disaggregated Trade |
| II. |
Data and Sources |
| |
A. |
Aggregate Trade |
| |
B. |
Disaggregated Trade |
| III. |
Key Findings |
| |
A. |
The Effect of Exchange Rate Volatility on Trade—Main Results |
| |
B. |
Do Members of Currency Unions Trade More? |
| |
C. |
Disaggregated Trade: Does Exchange Rate Volatility Have a Different Effect on Trade in Differentiated versus Homogeneous Products? |
| |
| Text Tables |
| 3.1 |
A Short-Run Effective Volatility of Real I.F.S. Exchange Rates in G-7 Countries by Major Country Groups: Decomposition of Volatility |
| 3.1B |
Short-Run Effective Volatility of Real I.F.S. Exchange Rates in G-7 Countries by Major Country Groups: Volatility within Groups |
| 3.2 |
Average Effective Volatility Ranking (1970–2002) |
| 3.3 |
Frequency Counting (f) for Top 5 (High Vol) and Bottom 5 (Low Vol) Lists (1970–2002) |
| 3.4 |
Real Effective Volatility Across Country Groups by Type of Exchange Rate Regime |
| 3.5 |
Real Effective Volatility Across Regimes and Time |
| 4.1 |
Effect of Long-Run Real Exchange Rate Volatility on Aggregate Trade |
| 4.2 |
Alternative Measures of Exchange Rate Volatility |
| 4.3 |
Effect of Exchange Rate Volatility on Trade in Different Types of Products |
| |
| References |
| |
| Figures |
| 3.1 |
Short-Run Effective Volatility of the Real Exchange
Rate by Country Groups, 1970–2002 |
| 3.2 |
Short-Run Effective Volatility of the Real Exchange Rate for the G-7 Countries |
| 3.3 |
Short-Run Effective Volatility of the Real Exchange Rate in Developing Countries Grouped by Geographic Region |
| 3.4 |
Short-run Effective Volatility of the Real Exchange Rate in Two Developing Country Croups by Source of Export Earnings |
| 3.5 |
Short-Run Effective Volatility of the Nominal Exchange
Rate by Major Country Groups, 1970–2002 |
| 3.6 |
Long-Run Effective Volatility of the Real Exchange Rate by Major Country Groups |
| 3.7 |
Long-Run Effective Conditional Volatility of the Real Exchange Rate by Major Country Groups |
| 3.8 |
Long-Run Effective Volatility of the Real Exchange Rate in the G-7 Countries |
| 4.1 |
Effective Volatility of the Real Exchange Rate and World Trade |
| 4.2 |
Effective Volatility of the Real Exchange Rate and Trade: Major Country Groups |
| 4.3 |
Effective Volatility of the Real Exchange Rate and Trade: Developing Countries by Region |
| 4.4 |
Effective Volatility of the Real Exchange Rate and Trade: Developing Countries by Type of Export |
| |
| Appendix Tables |
| III.1 |
List of Countries in Major Country Groupings |
| III.2 |
List of Countries in Regional Groups of Developing Countries and by Source of Export Earnings |
| III.3 |
List of Countries in the Real Parallel Exchange Rate Dataset |
| III.4 |
Short-run Effective Volatility of Real I.F.S. Exchange Rate: Smaller Sample of Major Country Groups |
| III.5 |
Short-Run Volatility of Real Parallel Exchange Rate: Smaller Sample of Major Country Groups |
| III.6 |
Correspondence Between the Official/IMF and Natural
Regime Classification 1970–2001 |
| III.7 |
Distribution of Exchange Rate Regimes Across Country
Groups 1970–2001 |
| III.8 |
Distribution of Exchange Rate Regimes Across Country
Groups 1970–2001 |
| IV.1 |
Summary Statistics and Correlations |
| IV. 2 |
The Role of Exchange Rate Volatility I Trade: Main Results |
| IV. 3 |
Alternative Measures of Volatility: Short-Run, Parallel Market, Nominal and Conditional |
| IV.4 |
Country-Pair Fixed Effects |
| IV.5 |
Time-Varying Country Effects |
| IV.6A |
Controlling for Endogeneity of Exchange Rate Volatility: Relative Money Supply as IV |
| IV.6B |
Controlling for Endogeneity of Exchange Rate Volatility: Common Anchor Dummy as IV |
| IV.6C |
Controlling for Endogeneity of Exchange Rate Volatility: Propensity to Share a Common Anchor as IV |
| IV.7 |
Differentiation by Country Type |
| IV.8 |
Differentiation by Product Type (SUR) |
| IV.9 |
List of Countries in the Regressions with Disaggregated Trade |
| IV.10 |
Classification of Products into Homogeneous and Differentiated Categories |
