A Synthesis of the Effects of Exchange Rate Volatility on International Trade: A Meta-Regression Analysis

This paper surveys literature that investigates the effects of exchange rate uncertainty on international trade. We perform meta-regression analysis on 41 studies with 807 estimates. We show that the empirical works exhibit substantial publication selection and show a significant genuine exchange rate volatility effect on trade flows after correction of publication bias. In addition, the literature reveals a pronounced heterogeneity with respect to model specifications, samples, time horizons, and countries characteristics. The results appear robust among the different estimators and to the inclusion of dummies for the type of research outlet and publication year. These findings are supported by separate assessment of primary studies with, respectively, total exports and sectoral exports as the dependent variable. In comparison with the sectoral exports literature, the total exports literature seems more homogenous and its identified exchange rate volatility effect on trade is less conditional. In general, our most important advice for policy makers is that economic research does not reveal a single representative effect size.