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Exchange rate volatility and commodity trade between United States and Australia: An asymmetric analysis

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  • Mohsen Bahmani‐Oskooee
  • Hanafiah Harvey

Abstract

Previous studies that assessed the impact of exchange rate volatility on Australian trade flows assumed that the effects are symmetric, meaning that if an x% increase in volatility hurts trade flows by y%, an x% decreased in volatility, boosts trade flows by y%. The new direction in the literature is to engage in asymmetric analysis, since the rate at which trade flows respond to increased volatility could be different than the rate at which they response to declines. We do this by assessing the symmetric and asymmetric effects of the Australian dollar–U.S. dollar exchange rate volatility on the exports of 230 U.S. exporting industries to Australia and 129 Australian exporting industries to the United States. We find overwhelming support for short‐run and long‐run asymmetric effects of exchange rate volatility on both countries exports to each other. A few large industries that were not found to be affected by volatility symmetrically, they were found to be affected asymmetrically.

Suggested Citation

  • Mohsen Bahmani‐Oskooee & Hanafiah Harvey, 2021. "Exchange rate volatility and commodity trade between United States and Australia: An asymmetric analysis," The World Economy, Wiley Blackwell, vol. 44(6), pages 1509-1700, June.
    • Handle: RePEc:bla:worlde:v:44:y:2021:i:6:p:1509-1700
    DOI: 10.1111/twec.13057
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    References listed on IDEAS

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    Cited by:

    1. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah, 2023. "Whose policy uncertainty matters in the trade between Mexico and the U.S.: Additional evidence from asymmetric analysis," The Journal of Economic Asymmetries, Elsevier, vol. 28(C).
    2. Lal, Madan & Kumar, Satish & Pandey, Dharen Kumar & Rai, Varun Kumar & Lim, Weng Marc, 2023. "Exchange rate volatility and international trade," Journal of Business Research, Elsevier, vol. 167(C).
    3. Nenavath Sreenu, 2024. "Exploring unbalanced impacts of exchange rate volatility on the shadow economy: new evidence from BRICS nations," Economic Change and Restructuring, Springer, vol. 57(4), pages 1-26, August.

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