A New Look at Exchange Rate Volatility and Trade Flows

By Peter B. Clark, Shang-Jin Wei, Natalia T. Tamirisa, Azim M Sadikov, Li Zeng

September 30, 2004

Preview Citation

Format: Chicago

Peter B. Clark, Shang-Jin Wei, Natalia T. Tamirisa, Azim M Sadikov, and Li Zeng. A New Look at Exchange Rate Volatility and Trade Flows, (USA: International Monetary Fund, 2004) accessed November 21, 2024

Summary

The effect of exchange rate volatility on trade flows was examined by a 1984 IMF study on G-7 countries. Over the past two decades, many developments in the world economy, such as the currency crises in the 1990s and increasing cross-border capital flows, may have exacerbated exchange rate volatility, while others, such as a deepening of the market in foreign exchange hedging instruments, may have reduced the impact of volatility on trade flows. Using recent advances in the economic theories on trade and in statistical methodologies, this paper revisits this important issue by taking into account these new developments and examining their effects on developing and transition economies, as well as on developed countries.

Subject: Exchange rate arrangements, Exchange rates, Foreign exchange, International trade, International trade organizations, Nominal effective exchange rate, Plurilateral trade, Real effective exchange rates, Real exchange rates

Keywords: Africa, Central and Eastern Europe, Country, Exchange rate, Exchange rate arrangements, Exchange rate fluctuation, Exchange rate movement, Exchange rate uncertainty, Exchange rate variability, Exchange rate volatility, Exchange rates, Global, International trade organizations, Middle East, Nominal effective exchange rate, Nominal exchange rate, OP, Plurilateral trade, Real effective exchange rates, Real exchange rates, Trade, Volatility measure, Western Hemisphere

Publication Details

Pages:

63
Volume:

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DOI:

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Issue:

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Series:

Occasional Paper No. 2004/009
Stock No:

S235EA
ISBN:

9781589063587
ISSN:

0251-6365

Supplemental Resources

Link to Abstract
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