On the Trade Impact of Nominal Exchange Rate Volatility

39 Pages Posted: 13 Jan 2005

Date Written: April 28, 2004

Abstract

What is the effect of nominal exchange rate variability on trade? I argue that the methods conventionally used to answer this perennial question are plagued by a variety of sources of systematic bias. I propose a novel approach that simultaneously addresses all of these biases, and present new estimates from a broad sample of countries from 1970 to 1997. The answer to the question is: Not much.

Keywords: exchange rate volatility, trade, gravity equation, heteroskedasticity, Poisson regression, instrumental variable

JEL Classification: C21, F10,F11, F12, F15

Suggested Citation

Tenreyro, Silvana, On the Trade Impact of Nominal Exchange Rate Volatility (April 28, 2004). Available at SSRN: https://ssrn.com/abstract=648225 or http://dx.doi.org/10.2139/ssrn.648225

Silvana Tenreyro (Contact Author)

London School of Economics (LSE) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

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