IDEAS home Printed from https://ideas.repec.org/a/eee/ecofin/v25y2013icp70-93.html
   My bibliography  Save this article

The effects of exchange-rate volatility on commodity trade between the U.S. and Brazil

Author

Listed:
  • Bahmani-Oskooee, Mohsen
  • Harvey, Hanafiah
  • Hegerty, Scott W.

Abstract

As Brazil continues its emergence as a major world economy, it has enjoyed both increased trade and capital inflow-fueled currency appreciations. But while it is often thought that exchange-rate volatility hurts trade, the economic literature has found that this is not always true. This study examines bilateral export and import flows between the United States and Brazil from 1971 to 2010, using cointegration analysis to estimate the effects of this risk. This study arrives at three main conclusions. First, while the majority of industries are not affected by volatility in the long run, an unexpectedly large share of those that are affected responds positively to increased risk. Second, sensitivity to risk differs markedly by industry sector: Brazilian exports of agricultural products are particularly harmed, while U.S. machinery imports are not impacted at all. Finally, products with small trade shares more likely to respond to increased uncertainty than are major exporters.

Suggested Citation

  • Bahmani-Oskooee, Mohsen & Harvey, Hanafiah & Hegerty, Scott W., 2013. "The effects of exchange-rate volatility on commodity trade between the U.S. and Brazil," The North American Journal of Economics and Finance, Elsevier, vol. 25(C), pages 70-93.
    • Handle: RePEc:eee:ecofin:v:25:y:2013:i:c:p:70-93
    DOI: 10.1016/j.najef.2013.03.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1062940813000429
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.najef.2013.03.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Mohsen Bahmani-Oskooee & Scott W. Hegerty, 2009. "The Effects of Exchange-Rate Volatility on Commodity Trade between the United States and Mexico," Southern Economic Journal, John Wiley & Sons, vol. 75(4), pages 1019-1044, April.
    2. Arize, Augustine C. & Osang, Thomas & Slottje, Daniel J., 2008. "Exchange-rate volatility in Latin America and its impact on foreign trade," International Review of Economics & Finance, Elsevier, vol. 17(1), pages 33-44.
    3. Mohsen Bahmani-Oskooee & Hanafiah Harvey & Scott Hegerty, 2013. "Exchange-rate variability and U.S.-French trade flows: evidence from industry data," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(4), pages 685-719, November.
    4. Paresh Kumar Narayan, 2005. "The saving and investment nexus for China: evidence from cointegration tests," Applied Economics, Taylor & Francis Journals, vol. 37(17), pages 1979-1990.
    5. Qian, Ying & Varangis, Panos, 1994. "Does Exchange Rate Volatility Hinder Export Growth?," Empirical Economics, Springer, vol. 19(3), pages 371-396.
    6. Thursby, Jerry G & Thursby, Marie C, 1987. "Bilateral Trade Flows, the Linder Hypothesis, and Exchange Risk," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 488-495, August.
    7. Mohsen Bahmani‐Oskooee & Scott W. Hegerty, 2007. "Exchange rate volatility and trade flows: a review article," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 34(3), pages 211-255, August.
    8. Antonio Aguirre & Afonso Ferreira & Hilton Notini, 2007. "The Impact of Exchange Rate Volatility on Brazilian Manufactured Exports," Económica, Instituto de Investigaciones Económicas, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0(1-2), pages 3-19, January-D.
    9. Nicolas Péridy, 2003. "Exchange rate volatility, sectoral trade, and the aggregation bias," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(3), pages 389-418, September.
    10. Arize, A. C., 1995. "Trade flows and real exchange-rate volatility: an application of cointegration and error-correction modeling," The North American Journal of Economics and Finance, Elsevier, vol. 6(1), pages 37-51.
    11. Mohsen Bahmani-Oskooee & Rajarshi Mitra, 2008. "Exchange Rate Risk and Commodity Trade Between the U.S. and India," Open Economies Review, Springer, vol. 19(1), pages 71-80, February.
    12. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    13. Donald V. Coes, 1981. "The Crawling Peg and Exchange Rate Uncertainty," Palgrave Macmillan Books, in: John Williamson (ed.), Exchange Rate Rules, chapter 5, pages 113-139, Palgrave Macmillan.
    14. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    15. Nogueira Jr., Reginaldo P. & León-Ledesma, Miguel A., 2009. "Fear of Floating in Brazil: Did Inflation Targeting matter?," The North American Journal of Economics and Finance, Elsevier, vol. 20(3), pages 255-266, December.
    16. Hochreiter, Eduard & Siklos, Pierre L., 2002. "Alternative exchange-rate regimes: The options for Latin America," The North American Journal of Economics and Finance, Elsevier, vol. 13(3), pages 195-211, December.
    17. Bahmani-Oskooee, Mohsen & Bolhassani, Marzieh & Hegerty, Scott W., 2011. "Industry trade between Canada and Mexico: Will a weakening peso help Mexican manufacturing in the long run?," The North American Journal of Economics and Finance, Elsevier, vol. 22(2), pages 89-101, August.
    18. Asseery, A. & Peel, D. A., 1991. "The effects of exchange rate volatility on exports : Some new estimates," Economics Letters, Elsevier, vol. 37(2), pages 173-177, October.
    19. Michael D. McKenzie, 1999. "The Impact of Exchange Rate Volatility on International Trade Flows," Journal of Economic Surveys, Wiley Blackwell, vol. 13(1), pages 71-106, February.
    20. Wu, Thomas, 2012. "Order flow in the South: Anatomy of the Brazilian FX market," The North American Journal of Economics and Finance, Elsevier, vol. 23(3), pages 310-324.
    21. Mohsen Bahmani-Oskooee & Marzieh Bolhassani & Scott Hegerty, 2012. "Exchange-rate volatility and industry trade between Canada and Mexico," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(3), pages 389-408, May.
    22. Ekaterini Panopoulou & Nikitas Pittis, 2004. "A comparison of autoregressive distributed lag and dynamic OLS cointegration estimators in the case of a serially correlated cointegration error," Econometrics Journal, Royal Economic Society, vol. 7(2), pages 585-617, December.
    23. Arize, A. C., 1996. "Cointegration test of a long-run relation between the trade balance and the terms of trade in sixteen countries," The North American Journal of Economics and Finance, Elsevier, vol. 7(2), pages 203-215.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Muhammad Aftab & Karim Bux Shah Syed & Rubi Ahmad & Izlin Ismail, 2016. "Exchange-rate variability and industry trade flows between Malaysia and Japan," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(4), pages 453-478, June.
    2. Abdorreza Soleymani & Soo Y. Chua & Abdul Fatah Che Hamat, 2017. "Exchange rate volatility and ASEAN-4’s trade flows: is there a third country effect?," International Economics and Economic Policy, Springer, vol. 14(1), pages 91-117, January.
    3. Cueyt SEVIM & Taylan Taner DOGAN, 2016. "Turkiye Ekonomisinde Ihracat ve Doviz Kuru Oynakligi Iliskisi," Ege Academic Review, Ege University Faculty of Economics and Administrative Sciences, vol. 16(2), pages 303-318.
    4. Mohsen Bahmani‐Oskooee & Toan Luu Duc Huynh & Muhammad Ali Nasir, 2021. "On the asymmetric effects of exchange‐rate volatility on trade flows: Evidence from US–UK Commodity Trade," Scottish Journal of Political Economy, Scottish Economic Society, vol. 68(1), pages 51-102, February.
    5. Abdorreza Soleymani & Soo Y. Chua, 2014. "Effect of exchange rate volatility on industry trade flows between Malaysia and China," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(5), pages 626-655, August.
    6. Mohsen Bahmani-Oskooee & Hanafiah Harvey & Scott Hegerty, 2013. "Exchange-rate variability and U.S.-French trade flows: evidence from industry data," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(4), pages 685-719, November.
    7. Bahmani-Oskooee, Mohsen & Harvey, Hanafiah, 2011. "Exchange-rate volatility and industry trade between the U.S. and Malaysia," Research in International Business and Finance, Elsevier, vol. 25(2), pages 127-155, June.
    8. Mohsen Bahmani-Oskooee & Sujata Saha, 2020. "Exchange rate risk and commodity trade between U.S. and India: an asymmetry analysis," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 25(4), pages 675-695, October.
    9. Mohsen Bahmani‐Oskooee & Hanafiah Harvey, 2021. "Are the effects of exchange‐rate volatility on commodity trade between the U.S. and Mexico symmetric or asymmetric?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2998-3027, April.
    10. repec:ibf:ijbfre:v:11:y:2017:i:2:p:23-38 is not listed on IDEAS
    11. Bahmani-Oskooee, Mohsen & Bolhassani, Marzieh & Hegerty, Scott W., 2011. "Industry trade between Canada and Mexico: Will a weakening peso help Mexican manufacturing in the long run?," The North American Journal of Economics and Finance, Elsevier, vol. 22(2), pages 89-101, August.
    12. Mohsen Bahmani-Oskooee & Marzieh Bolhassani & Scott Hegerty, 2012. "Exchange-rate volatility and industry trade between Canada and Mexico," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 21(3), pages 389-408, May.
    13. Carlos Moslares & E. M. Ekanayake, 2018. "The Effect Of Real Exchange Rate Volatility On Exports In The Baltic Region," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 12(1), pages 23-38.
    14. Marilyne Huchet-Bourdon & Jane Korinek, 2011. "To What Extent Do Exchange Rates and their Volatility Affect Trade?," OECD Trade Policy Papers 119, OECD Publishing.
    15. Bahmani-Oskooee, Mohsen & Hegerty, Scott W., 2008. "Exchange-rate risk and U.S.-Japan trade: Evidence from industry level data," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 518-534, December.
    16. Mohsen Bahmani-Oskooee & Huseyin Karamelikli, 2022. "Exchange Rate Volatility and Commodity Trade between U.K. and China: An Asymmetric Analysis," Chinese Economy, Taylor & Francis Journals, vol. 55(1), pages 41-65, January.
    17. Mohsen Bahmani‐Oskooee & Marina Kovyryalova, 2008. "Impact of Exchange Rate Uncertainty on Trade Flows: Evidence from Commodity Trade between the United States and the United Kingdom," The World Economy, Wiley Blackwell, vol. 31(8), pages 1097-1128, August.
    18. E. M. Ekanayake & Ranjini L. Thaver & Daniel Plante, 2012. "The Effects Of Exchange Rate Volatility On South Africa’S Trade With The European Union," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 6(3), pages 13-26.
    19. Carlos Moslares & E. M. Ekanayake, 2015. "The Impact Of Exchange Rate Volatility On Commodity Trade Between The United States And Spain," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 9(4), pages 37-49.
    20. Mohsen Bahmani-Oskooee & Ahmed Usman & Sana Ullah, 2023. "Asymmetric Impact of Exchange Rate Volatility on Commodity Trade Between Pakistan and China," Global Business Review, International Management Institute, vol. 24(3), pages 510-534, June.
    21. Mohsen Bahmani-Oskooee & Ridha Nouira, 2020. "On the impact of exchange rate volatility on Tunisia’s trade with 16 partners: an asymmetry analysis," Economic Change and Restructuring, Springer, vol. 53(3), pages 357-378, August.

    More about this item

    Keywords

    Exchange rate volatility; Industry data; Brazil; United States; Bounds testing;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecofin:v:25:y:2013:i:c:p:70-93. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/620163 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.