Does Real Exchange Rate Volatility Affect Sectoral Trade Flows?

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    Abstract

    This article investigates empirically the effect of real exchange rate volatility on sectoral bilateral trade flows between the United States and its top 13 trading partners. Our investigation also considers those effects on trade flows that may arise through changes in income volatility and the interaction between income and exchange rate volatilities. We provide evidence that (i) exchange rate volatility does not systematically affect sectoral trade flows, (ii) income volatility has little impact on trade flows, and (iii) the effect of the interaction term on trade flows is opposite that of exchange rate volatility, dampening its impact on trade flows. [ABSTRACT FROM AUTHOR]
    Original languageEnglish
    Pages (from-to)313 - 335
    JournalSouthern Economic Journal
    Volume77
    Issue number2
    Publication statusPublished - 2010

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