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Some Further Evidence on Exchange-Rate Volatility and Exports

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Abstract

The relationship between exchange-rate volatility and aggregate export volumes is examined using a model that includes real export earnings of oil-exporting economies as a determinant of export volumes of a sample of 12 industrial countries. Four fixed-coefficient panel-data 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 exchange-rate volatility. Our aim is to provide a theoretically and empirically justifiable specification that can guide researchers. In contrast to recent studies employing panel data, we find little evidence that volatility has a negative and significant impact on trade. We use second-generation RC estimation, which corrects for biases arising from incorrect functional forms, omitted variables, and measurement errors. Our results suggest that the finding of a significant and negative impact of volatility is attributable to specification biases.

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Author information

Authors and Affiliations

  1. Economic Research Department, Bank of Greece, El. Venizelos 21, 102 50, Athens, Greece

    George Hondroyiannis & George Tavlas

  2. Harokopio University, Athens, Greece

    George Hondroyiannis

  3. U.S. Bureau of Labor Statistics, Washington, DC, USA

    P.A.V.B. Swamy

  4. U.S. Department of State, Washington, DC, USA

    Michael Ulan

Authors
  1. George Hondroyiannis
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  2. P.A.V.B. Swamy
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  3. George Tavlas
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  4. Michael Ulan
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Corresponding author

Correspondence to George Tavlas.

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JEL no.

C23, F3, F31

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Hondroyiannis, G., Swamy, P., Tavlas, G. et al. Some Further Evidence on Exchange-Rate Volatility and Exports. Rev. World Econ. 144, 151–180 (2008). https://doi.org/10.1007/s10290-008-0141-4

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  • DOI: https://doi.org/10.1007/s10290-008-0141-4

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