Cointegration: how short is the long run?

This article investigates empirically the impact of real exchange-rate volatility on the export flows of 13 less developed countries (LDC's) over the quarterly period 1973–1996. Estimates of the cointegrating relations are obtained using Johansen's multivariate procedure. Estimates of the short-run dynamics are obtained for each country using the error-correction technique. The major results show that increases in the volatility of the real effective exchange rate, approximating exchange-rate uncertainty, exert a significant negative effect on export demand in both the short-run and the long-run in each of the 13 LDC's. These effects may result in significant reallocation of resources by market participants.

Exchange-Rate Volatility and Foreign Trade: Evidence From Thirteen LDC's

This paper examines the impact of exchange rate volatility on the trade flows of the G-7 countries in the context of a multivariate error-correction model. The error-correction models do not show any sign of parameter instability. The results indicate that the exchange rate volatility has a significant negative impact on the volume of exports in each of the G-7 countries. Assuming market participants are risk averse, these results imply that exchange rate uncertainty causes them to reduce their activities, change prices, or shift sources of demand and supply in order to minimize their exposure to the effects of exchange rate volatility. This, in turn, can change the distribution of output across many sectors in these countries. It is quite possible that the surprisingly weak relationship between trade flows and exchange rate volatility reported in several previous studies are due to insufficient attention to the stochastic properties of the relevant time series. Copyright 1993 by MIT Press.

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Does Exchange Rate Variability Depress Trade Flows ? Evidence From Error Correction Models

This paper reviews the theoretical and empirical literature on the effectiveness of fiscal policy. The focus is on the size of fiscal multipliers, and on the possibility that multipliers can turn negative (i.e., that fiscal contractions can be expansionary). The paper concludes that fiscal multipliers are overwhelmingly positive but small. However, there is some evidence of negative fiscal multipliers.

The Effectiveness of Fiscal Policy in Stimulating Economic Activity: A Review of the Literature

Purpose – Since 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/approach – This 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.Findings – The 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 b...

Exchange rate volatility and trade flows: a review article

This paper uses VAR models to investigate the impact of real exchange rate volatility on U.S. bilateral imports from the United Kingdom, France, Germany, Japan and Canada. The VAR systems include U.S. and foreign macro variables, and are estimated separately for each country. The major results suggest that the effect of volatility on imports is weak, although permanent shocks to volatility do have a negative impact on this measure of trade, and those effects are relatively more important over the flexible rate period. Copyright 1989 by MIT Press.

Real exchange rate volatility and the us. bilateral trade: a var approach

Exchange rate volatility and U.S. multilateral trade flows

Monetary shocks, the exchange rate, and the trade balance

International transmission of aggregate shocks under fixed and flexible exchange rate regimes: United Kingdom, France, and Germany, 1959 to 1985

https://bura.brunel.ac.uk/bitstream/2438/10642/4/Fulltext.pdf

Faik Koray

Papers

Real exchange rate volatility and the us. bilateral trade: a var approach

Exchange rate volatility and U.S. multilateral trade flows

Monetary shocks, the exchange rate, and the trade balance

International transmission of aggregate shocks under fixed and flexible exchange rate regimes: United Kingdom, France, and Germany, 1959 to 1985

Fiscal Multipliers in Good Times and Bad Times