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The Effect of Exchange Rate Risk on Foreign Trade

Author

Listed:
  • Petronela Mateescu

    (Associate Lector Ph.D., "Petre Andrei" University of Iasi, Romania)

Abstract

This paper explores the effect of exchange rate volatility on international trade flows of European Union Member States by applying a model of a monthly balance panel between 2002 and 2017. Starting from a general modified weighted model, we added some control variable to measure the good governance. After a general analysis of all the European Union countries, we focus on the response of the trade on different partner regions, or various trade goods. By using country fixed effect model, we find that there is an adverse effect of the exchange rate volatility on trade flows for the European Union countries with small differences depending on partner region or the type of the goods trade. Regarding the Governance Indicators we obtain different results, most of them having negative effect but with different statistically significance.

Suggested Citation

  • Petronela Mateescu, 2020. "The Effect of Exchange Rate Risk on Foreign Trade," Anuarul Universitatii „Petre Andrei” din Iasi / Year-Book „Petre Andrei” University from Iasi, Fascicula: Drept, Stiinte Economice, Stiinte Politice / Fascicle: Law, Economic Sciences, Political Scien, Editura Lumen, Department of Economics, vol. 26, pages 34-54, December.
    • Handle: RePEc:lum:rev11d:v:26:y:2020:i::p:34-54
    DOI: https://doi.org/10.18662/upalaw/47
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    exchange rate risk; foreign trade; governance indicators; European Union;
    All these keywords.

    JEL classification:

    • K1 - Law and Economics - - Basic Areas of Law
    • K2 - Law and Economics - - Regulation and Business Law
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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