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Real & Nominal Foreign Exchange Volatility Effects on Exports – The Importance of Timing

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  • Cotter, John

Abstract

This paper compares real and nominal foreign exchange volatility effects on exports. Using a flexible lag version of the Goldstein-Khan two-country imperfect substitutes model for bilateral trade, we identify the overall effect into both a timing as well as a size impact. We find that the size impact of forecasted foreign exchange volatility does not vary according to the measure used in terms of magnitude and direction. However, there are very different timing effects, when we compare real and nominal foreign exchange rate volatility.

Suggested Citation

  • Cotter, John, 2006. "Real & Nominal Foreign Exchange Volatility Effects on Exports – The Importance of Timing," MPRA Paper 3494, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:3494
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    References listed on IDEAS

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    1. Christopher F. Baum & Mustafa Caglayan & Neslihan Ozkan, 2004. "Nonlinear effects of exchange rate volatility on the volume of bilateral exports," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(1), pages 1-23.
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    5. Klaassen, Franc, 2004. "Why is it so difficult to find an effect of exchange rate risk on trade?," Journal of International Money and Finance, Elsevier, vol. 23(5), pages 817-839, September.
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    More about this item

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G0 - Financial Economics - - General

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