Title: Exchange rate volatility and trade flows: evidence from the European Union

Authors: Nikiforos T. Laopodis

Addresses: Villa Julie College, USA

Abstract: The paper investigates the issue of whether exchange rate volatility has any significant adverse effects on the trade volume between several European Union countries and Germany over the 1979-1998 period. The measure for exchange rate volatility is obtained from an Exponentially Generalized Auto-Regressive Conditionally Heteroskedastic (EGARCH) model. The results indicated that short-run volatility did not have any deleterious effects on the volume of bilateral trade despite the former|s noticeable increase or, at least, persistence for most of the exchange rates. Further, the findings suggested that Spain|s and Portugal|s participation in, and the exits of the United Kingdom and Italy from, the ERM have not exerted any (statistically) significant negative effects on the trade flows.

Keywords: exchange rate volatility; trade flows; European Union; trade volume; Germany; bilateral change.

DOI: 10.1504/GBER.1999.006144

Global Business and Economics Review, 1999 Vol.1 No.2, pp.172 - 202

Published online: 07 Feb 2005 *

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