Author:
Bahmani‐Oskooee Mohsen,Hegerty Scott W.
Abstract
PurposeSince the last review article by McKenzie, the literature has experienced a surge in the number of empirical articles. These new contributions, coupled with those that were overlooked by McKenzie, set the stage for this review. Many of the recent studies have been empirical in nature and these deserve specific attention. Thus, this paper aims to survey and review all of the studies by paying attention to the attributes outlined in the text.Design/methodology/approachThis paper examines the vast empirical literature, up to 2005, to assess the main trends in modeling and estimating these trade flows at the aggregate, bilateral, and sectoral levels.FindingsThe increase in exchange‐rate volatility since 1973 has had indeterminate effects on international export and import flows. Although it can be assumed that an increase in risk may lead to a reduction in economic activity, the theoretical literature provides justifications for positive or insignificant effects as well. Similar results have been found in empirical tests. While modeling techniques have evolved over time to incorporate new developments in econometric analysis, no single measure of exchange‐rate volatility has dominated the literature.Originality/valueAn argument put forward by the opponents of the floating exchange rates is that such rates introduce uncertainty into the foreign exchange market, which could deter trade flows. However, a theoretical argument is put forward by some to show that uncertainty could also boost trade flows if traders increase their trade volume to offset any decrease in future revenue due to exchange rate volatility. The empirical literature reviewed in this paper supports both views.
Subject
General Economics, Econometrics and Finance
Reference95 articles.
1. Abrams, R.K. (1980), “International trade flows under flexible exchange rates”, Economic Review, Vol. 65 No. 3, pp. 3‐10.
2. Akhtar, M.A. and Hilton, R.S. (1984), “Effects of uncertainty on German and US trade”, Federal Reserve Bank of New York Quarterly Review, pp. 7‐16.
3. Aristotelous, K. (2001), “Exchange‐rate volatility, exchange‐rate regime, and trade volume: evidence from the UK‐US export function (1889‐1999)”, Economics Letters, Vol. 72 No. 1, pp. 87‐94.
4. Aristotelous, K. (2002), “The impact of the post‐1972 floating exchange rate regime on US exports”, Applied Economics, Vol. 34 No. 13, pp. 1627‐32.
5. Arize, A.C. (1995), “Trade flows and real exchange‐rate volatility: an application of cointegration and error‐correction modeling”, North American Journal of Economics & Finance, Vol. 6 No. 1, pp. 37‐51.
Cited by
244 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献