Denaux run. Cheong 2004 examines the possible impact

Denaux and Falks 2012 had examined the
effect of exchange rate variations on bilateral trade flows between Turkey and
its 5 major trade partners in the European Union (EU). The effect of exchange
rate volatility on trade was examined by an OLS method used quarterly data from
1988 to 2011. In this study they found that exchange rate volatility does not
have a statistically a major effect on import demand, that the import demand of
Turkish was determined by income and currency appreciation, and also in 2008
euro crises did not have a significant effect on imports. In this study they
only evaluated the impact of exchange rate volatility on Turkey’s aggregated
import demand collecting the data from the selected EU countries which accounts
for almost half of total imports of Turkey which is the limitation of the study.

Anh
Mai Thi Van 2012 has showed
the relationship between exchange rate volatility and trade flow which mainly emphases
on examining the influence of exchange rate instability on exports from Sweden
to Germany. In this study Auto Regressive Distributed Lag (ARDL) model was
employed to find the evaluations of the long run equilibrium as well as short
run dynamics. The results of this paper showed that the exchange rate volatility
has significant short run effects on export value while there are no
significant effect in long run.

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Cheong
2004 examines the possible impact of exchange
rate volatility on the United Kingdom’s import. In this paper ARCH type
auxiliary model was used to measure uncertainty in the exchange rate, and in
the second stage they discuss a correct procedure of the OLS estimates for the primary
equation, which includes the generated variable. They applied two?step
approach, where they found a statistically negative impact of exchange rate volatility
on UK’s imports. The implication of their finding to UKs macroeconomic policy was
that if the country implements the Euro, there will be a significantly positive
effect on UKs trade and the economic performance with reduced exchange rate fluctuations,
even though the overall benefits would be partial because there will be still
uncertainty on the euro/dollar exchange rate.

Christopher
F. Baum and Mustafa Caglayan 2008 had presented an empirical study of the hypotheses that
exchange rate volatility may have an effect on both the volume and variability
of trade ?ows by considering an extensive set of industrial countries’ mutual
real trade ?ows over the period 1980–1998. Similar to the ?ndings of previous
theoretical and empirical research, their ?rst set of results shown that the influence
of exchange rate volatility on trade ?ows is unspecified. In their second set
of results provides new ?ndings that exchange rate instability has a reliable
positive and signi?cant effect on the exchange rate instability of bilateral
trade ?ows.

Serenis
and Tsounis 2014 examined
the impact of exchange rate fluctuation for two small countries, Croatia and
Cyprus, on the aggregate exports of first quarter of 1990 to first quarter of
2012. In this study, an unambiguous account of non stationarity was taken into
account and a multivariate co-integration error correction model was applied
for both countries and two different measures of volatility. In which each
model satisfied numerous commonly used econometric tests in the analysis of
time-series data such that co-integration and unit roots. There empirical
analysis suggested that exchange rate instability when measured as the simple
standard deviation of the log effective exchange has an influence on the level
of exports for both countries. Nevertheless, when an alternate measure was used
in this study, there was an indication of an impact from movements of the
exchange rate on the level of exports. As a result, there was a mixed
statistical significant relationship, for both countries in sample. First, they
suggested that additional measures of instability can be used to model the
effects of exchange rate instability to exports, thus indicating that there is
no specific way of measuring volatility. Second, there results showed that high
and low fluctuation produce a major negative long-run effect on the real exports
for some countries. From a policy prospective, the paper suggested that policy
makers should consider exchange rate volatility for some countries but not all,
when applying economic policy, particularly, for those like Cyprus and Croatia,
that it was found that the exchange rate instability had a positive impact on exports.

Ekanayake
and Chatrna 2010 investigates
the impact of exchange rate volatility on Sri Lankan’s exports to its main
trading partners. In this paper, they used a generalized ARCH-type model
(GARCH) to generate a measure of exchange rate instability which was then used
in a model of Sri Lankan exports. They used sectoral trade data which allows them
to identify whether the impact of exchange rate instability differs depending
on the types of the merchandise traded. The results found in this study suggested
that the effect of exchange rate volatility differs among different types of
goods while it remains hard to firmly establish the nature of the affiliation. In
this paper co-integration results shows that there exists a long-run
relationship among real exports and real foreign economic activity, real
exchange rate volatility, and real exchange rate. Out of the eight product
groups, in which five of them having negative signs for the exchange rate instability
variable which indicating that exchange rate instability inclines to prevent
exports in the long-run, for these products. In the error-correction results showed
that, in the short-run, exchange rate instability has a significant negative effect
on Sri Lankan’s exports. They concluded that the results had obtained are
favorable to the hypothesis that exchange rate uncertainty depresses Sri Lankan’s
export volumes. The results of this paper recommended that stabilization of Sri
Lankan rupee along with the exchange rate is definitely in the country’s best
interest. Hence, Sri Lanka should implement tight monetary policy, such that
increase of interest rates, to get these objectives.

ElAmrani
2015 examined the effect of exchange rate instability
and exchange rate systems of Norway with a generalized gravity model and an
error correction model using aggregate Nor- wegian data for Norway exports to
UK and USA for the period 1900 to 2000. The ?ndings of this study suggested
that exchange rate instability and exchange rate regimes had a negative but
insigni?cant effect on exports from Norway to United States. On the other hand,
they found that the effect of exchange rate instability on exports from Norway
to the United Kingdom was positive, both in the short run and long run. Furthermore,
the results suggested that an intermediate and ?oating exchange rate regime had
a very minor negative, but insigni?cant effect on the trade ?ow.

In the case of UK, the results suggested that
exchange rate instability had a significant positive long-run effect on real
exports from Norway to UK, whereas it played a considerably minor role in the
short-run. On the other hand, exchange rate regimes show a negative but minor effect
on exports. The suggested explanation of the study for the di?erence among the short-run and long-run impacts
of exchange rate volatility is that trade contracts often are
“irreversible” in the short-run whereas in the longer run they become
more “?exible” and the commodity traders are allowed to adjust both
prices and quantities, hence the estimated short-run impact is smaller than the
long-run impact.

Genc and Artar 2014 examined two key objectives in this study to determine the effect of
exchange rates on imports and to examine the influence of exchange rates on
exports of developing countries. This study emphasized on inaugurating whether
there was co-integrated relationship among effective exchange rates of specific
developing countries. In this paper they applied the panel co-integration
method on the data from 1985 to 2012. In the long run there was co-integrated association
among exchange rates and imports and exports of developing countries. Error
correction parameters for export is negative and significant however there was
a long term affiliation between the actual exchange rate and exports.  The error correction parameter for import is
negative and statistically substantial and there is a long term relationship
between the effective exchange rate index and import. Out of 22, 5 developing
countries (Bolivia, Cameroon, Dominica, Gabon and Mexico) have both long and
short term relationship and are statistically substantial. The paper concludes
that overall findings shows that exchange rate effects backing the estimated
results for the selected developing countries.

Yarmukhamedov
2007 empirically investigated
the impact of exchange rate fluctuations imports and exports of Sweden in this paper.
In this paper export and import volumes are deliberated from the point of their
determinants, plus exchange rate volatility, which had been measured through
EGARCH. The results this paper shown that short run dynamics of volatility adversely
related with both export and import, whereas deliberated from the case of prior
period volatility it shows positive relationship.

Wong
and Lee 2016 investigated
the effect of exchange rate instability on disaggregated bilateral exports of
Malaysia to China. In this study exchange rate volatility was estimated by the
threshold generalized autoregressive conditional heteroscedasticity (TGARCH)
model. The Johansen co-integration analysis and the dynamic ordinary least
squares (DOLS) estimator were used in the estimation. There was some indication
of exchange rate instability to have substantial effect on real exports. There was
long-run relationship between real export, real exchange rate and real foreign
demand. This paper suggested that in the long run, exporters of Malaysia should
develop their products through innovation and high technology.

DANLADI et al 2015 evaluated the effect of
exchange rate fluctuations on international trade in Nigeria on the annual data
from 1980 till 2013, the data was obtained from World Development Indicators
(WDI). Exchange rate instability, interest rate, gross national product (GDP),
investment, import and export were used to see the fundamental relationship among
exchange rate instability and international trade and also the long and short-run
relationship among exchange rate instability and international trade. For empirical
analysis Augmented Dickey-Fuller (ADF) was used for checking stationary,
followed by co-integration test, then the granger causality and the Error
Correction Model (ECM). The co-integration test showed that the variables are
co-integrated which suggests that a long-run relationship exist among the
variables however the granger causality test indicated that a causal
relationship occur among international trade and exchange rate instability. By ECM
analysis it was observed that exchange rate instability negatively impacts
international trade. This study then recommended that the government should put
in place exchange rate stability and trade policies that would promote better
trade conditions that will support local production in the economy. In order to
achieve this, the government should deliver effective infrastructural facilities
like energy resources.

Barkoulas
et al 2002 examines the impact
of exchange rate instability on the volume and variability of trade flows. They
employed a signal extraction framework, where they showed that the direction
and magnitude of importers and exporters optimum trading activities hinge on
the source of the instability. This framework also enabled them to classify the
impact of three different sources of exchange rate instability, which were related
to a general microstructure shock, the behavior of the exchange rate essentials,
and the indicating process of future policy advances. They showed that the
variance of microstructure shocks to that exchange rate process negatively impacts
both the level and the inconsistency of trade flows. Nevertheless, the
variances of exchange rate essentials and the noise of the sign of imminent
policy advances have uncertain influence on the level of trade flows but will
be negative and positive impacts, respectively, on the inconsistency of trade
flows. As the cause of exchange rate volatility does matter in defining its dynamic
effect on the behavior of trade, this paper suggests that empirical researchers
should try to estimate the components of exchange rate ambiguity and evaluate
their specific impacts on trade volume and trade instability.

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