Impact of the Exchange Rate Volatility on the Romanian Exports to the Eurozone
Abstract
This paper investigates the relationship between exchange rate volatility and Romanian exports to the Euro Area using a Vector Autoregressive (VAR) model. Monthly data on real exports and exchange rate volatility are analyzed for the period 1999–2009, with volatility measured through the standard deviation of the real exchange rate.
The empirical results reveal a weak and negative impact of exchange rate volatility on exports. Impulse-response analysis shows that shocks in volatility affect exports only temporarily, with effects dissipating within several months. The findings suggest that the limited influence may be due to the dominant role of multinational companies, which are better able to hedge currency risk.
References
Baak, S. J., Al-Mahmood, A., & Vixathep, S. (2003). Exchange rate volatility and exports.
Bahmani-Oskooee, M., & Payesteh, S. (1993). Exchange rate volatility and trade volume.
Barkoulas, J., Baum, C. F., & Caglayan, M. (2002). Exchange rate effects on trade flows.
Baum, C. F., & Caglayan, M. (2008). Exchange rate uncertainty and trade.
Chowdhury, A. R. (1993). Exchange rate volatility and trade flows.
Clark, P. B. (1973). Exchange risk and international trade.
De Grauwe, P. (1988). Exchange rate variability and trade growth.
Dickey, D. A., & Fuller, W. A. (1981). Unit root tests.
Franke, G. (1991). Exchange rate volatility and trading strategy.
Gagnon, J. E. (1993). Exchange rate variability and trade.
Lanne, M., Lütkepohl, H., & Saikkonen, P. (2001). Unit root tests with structural breaks.
Lütkepohl, H. (2007). VAR models.
Viaene, J. M., & de Vries, C. G. (1992). Trade and exchange rate volatility.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
By submitting a paper for publishing the authors hereby comply with the following provisions: 1. The authors retain the copyrights and only give the journal the right for first publication while licensing the work under Creative Commons Attribution License, which grants permissions to others to share the contribution citing this journal as first publication of the text. 2. The authors may enter separate, additional contractual relations for non-exclusive distribution of the published version of the work in this journal (e.g. to upload it in an institutional depository, or to be published in a book), given that they cite the first publication in this journal. 3. The authors are allowed and are encouraged to publish their works online (e.g. to upload it in an institutional depository, personal websites, social networks, etc.) before, during, and after the submission of the paper here, because this may lead to productive exchange, as well as earlier and larger referencing of the published works (see The Effect of Open Access).
