The intraday relation between return volatility, transactions, and volume

In this article, we examine the relation between return volatility, average trade size, and the frequency of transactions using transaction data. Consistent with Jones, Kaul, and Lipson (1994)(. Review of Financial Studies, 7, 631–651), our results show that the frequency of trades has a high explanatory power for return volatility. However, contrary to their finding, we find that average trade size contains nontrivial information for return volatility. The positive relation between return volatility and average trade size is more significant for actively traded stocks. Furthermore, return volatility exhibits significant intraday variations. It is found that the effect of trade frequency on return volatility is much stronger in the opening trading period.     

中国同欧盟贸易条件变化和波动情况的经验分析

本文在联合国统计司Comtrade数据库的基础上对中国同欧盟贸易条件的变化情况和波动情况进行了经验分析,结果发现:(1)从1987-2006年,中国同欧盟的整体贸易条件、初级产品贸易条件和制成品贸易条件都出现了一定程度的改善;(2)在中国加入WTO前后,除了高技术产品,中国同欧盟不管是整体贸易条件还是分类商品贸易条件,其波动性都是显著下降的;(3)减小中国同欧盟贸易条件波动的关键,一方面在于降低我国中技术产品进口对欧盟的过分依赖;另一方面在于改善中欧技术产品进出口贸易发展不平衡(进口大于出口)的局面.     

Investment under Trade Policy Uncertainty: an Empirical Investigation*

The link between trade policy uncertainty and the share of investment in GDP per capita is investigated using panel data drawn from over a hundred countries for the period 1960–2000. Five indicators of trade policy are used. Two specifications of volatility for each of the trade policy indicators are constructed as measures of trade policy uncertainty. Panel regression results suggest a robust correlation between the volatility of trade policy indicators and the investment share. A significant negative impact of trade policy volatility on the investment share is found in most trade policy indicators with an exception—the volatility of the trade share indicator more closely associated with volatility in quantity than in prices has a significant positive impact on the investment share.     

Regional origins of employment volatility: evidence from German states

Greater openness for trade can have positive welfare effects in terms of higher growth. But increased openness may also increase uncertainty through a higher volatility of employment. We use regional data from Germany to test whether openness for trade has an impact on volatility. We find a downward trend in the unconditional volatility of employment, paralleling patterns for output volatility. The conditional volatility of employment, measuring idiosyncratic developments across states, in contrast, has remained fairly unchanged. In contrast to evidence for the US, we do not find a significant link between employment volatility and trade openness.     

Terms of trade volatility,government spending cyclicality,and economic growth

This paper presents estimates of the effects that terms of trade volatility has on real gross domestic product (GDP) per capita growth. Based on 5‐year nonoverlapping panel data comprising 175 countries during 1980 to 2010, the paper finds that terms of trade volatility has significant negative effects on economic growth in countries with procyclical government spending. In countries where government spending is countercyclical, terms of trade volatility has no significant effect on growth. Conditional on the mediating role of government spending cyclicality, the GDP share of domestic credit to the private sector has no significant effect on the relationship between growth and terms of trade volatility.     

Output volatility,composition of trade,and transmission of economic shocks across countries

In this paper we investigate how supply and demand shocks in one country affect output volatility in other countries. While the evidence for cross‐country transmission of demand shocks is mixed, we find that volatile supply in one country leads to larger imports and output volatility in other countries. As a result, the effect of trade openness on output volatility is highly heterogeneous across countries and depends on the composition of their trade. Those countries whose imports originate in economies with volatile supply experience a greater impact of trade on output volatility.     

Trade liberalization and volatility: Evidence from Indian firms

I look at the impact of trade liberalization on sales growth volatility of firms. Exploiting India’s externally imposed trade reform to identify trade liberalization effects, I find that while a fall in the tariff on the final product produced by the firm is associated with an increase in volatility in Indian manufacturing firms, a fall in the tariff on intermediate inputs is associated with a decrease in volatility, with the latter effect dominating the former. I hence propose an additional channel for gains from trade liberalization to the ones documented in the literature.     

Asymmetric effect of exchange rate volatility on India's cross‐border trade: Evidence from global financial crisis and multiple threshold nonlinear autoregressive distributed lag model

This paper examines the asymmetric effect of exchange rate volatility on India's cross‐border trade with its major trading partners: Japan, Germany, the United States, and China. We extend previous studies in two ways. First, we examine whether global financial crisis changes the asymmetric effect of exchange rate volatility on India's cross‐border trade. Next, we divide exchange rate volatility into quintiles and examine the effect of each quintile on cross‐border trade by using the multiple threshold nonlinear autoregressive distributed lag (MTNARDL) model. Our findings from standard nonlinear ARDL (NARDL) indicate that the asymmetric relationship between exchange rate volatility and cross‐border trade changes as a result of global financial crisis. In addition, findings from MTNARDL indicate that in short‐run, exchange rate volatility symmetrically affects India's cross‐border trade with all sample countries whereas in long‐run it asymmetrically affects cross‐border trade. Overall, these findings are very important for policy implications and open a new dimension to exchange rate volatility and trade flows.     

Inflation volatility: A Bayesian approach

The ongoing trend of high inflation across much of the world has reignited interest in inflation volatility with varying foci and methods. In this paper, we employ a Bayesian framework to estimate inflation volatility using a sample of G20 countries. Estimation results suggest persistent heterogeneity in price volatility across time and countries. Furthermore, we use the Bayesian estimates of volatility to conduct several empirical analyses on the implications of interdependence of economies, development status for uncertainty. Further analyses on the determinants of price volatility suggest that trade openness, COVID-19, and the Ukraine crisis have positive impacts on volatility. Additionally, the nature of the political institutions and the share of manufacturing in total national output are also found to affect volatility to some extent.     

Exchange rate volatility and international trade: A general-equilibrium analysis

We analyze the relation between exchange-rate volatility and the volume of international trade, in a general-equilibrium stochastic-endowment economy with imperfect international commodity markets, and treating both variables as endogenous. Even in the simplest model, the sign of the relation depends on the source for the change in volatility. For instance, more volatility of the endowments and higher costs to international trade both boost exchange risk (and lower welfare); but the first increases the expected volume of trade, while the second decreases trade. Note that even the (inter-equilibria) relation between trade and welfare is ambiguous.     

Does a Regional Trade Agreement Lessen or Worsen Growth Volatility? An Empirical Investigation

This paper assesses how regional trade agreements (RTAs) impact on growth volatility for a sample of 170 countries over the period 1978–2012. Notwithstanding concerns that trade openness through RTAs might heighten exposure to shocks, RTAs through enhanced policy credibility, improved policy coordination and reduced risk of conflicts can also ease growth volatility. Empirical estimations suggest the benefits outweigh the costs as RTAs are consistently associated with lower growth volatility. In addition, smaller economies benefit more from the reduced growth volatility associated with RTAs than larger ones. The nature of the RTA also matters as shallow agreements such as partial‐scope preferential trade agreements do not appear to have a significant effect on growth volatility, whereas free trade areas and customs unions do. Finally, in investigating the drivers of RTAs, the regression results confirm that countries that are more prone to shocks are more likely to join an RTA, in particular with countries with relatively less volatile growth.     

Trade openness reduces growth volatility when countries are well diversified

This paper addresses the mechanisms by which trade openness affects growth volatility. Using a diverse set of export concentration measures, we present strong evidence pointing to an important role for export diversification in conditioning the effect of trade openness on growth volatility. Indeed, the effect of openness on volatility is shown to be negative for a significant proportion of countries with relatively diversified export baskets.     

Financial market participation and the developing country business cycle

I explore the implications of limited participation in financial markets on a standard small open economy business cycle model. Despite its parsimony, the limited participation model developed in this paper improves over the standard model in terms of explaining two important features of business cycle facts of developing countries: high volatility of consumption, and high negative correlation between the trade balance and output. Limited participation model is then used to inspect the effects of financial development and integration on macroeconomic volatility. Under a standard calibration, limited participation model leads to the conclusion that financial development and integration are associated with higher investment and output volatility. Effect of more participation on consumption volatility is dependent on the specification of the risk premium function.     

The Threshold Effect of Exchange Rate Volatility on Trade Volume: Evidence from G-7 Countries

Abstract

This paper uses a threshold model to examine a possible threshold effect in the impact of exchange rate volatility on trade volume for the bilateral trade volumes between the US and other G-7 countries. A grid-searching method is used to obtain the threshold points, and time-series econometric techniques are applied to estimate the long run stable relationships as well as short-run dynamics. The results support the existence of nonlinearity in the effect of exchange rate volatility, and indicate that trade volume tends to increase when exchange rate volatility surpasses a certain threshold point.     

Exchange Rate Volatility,Earnings Uncertainty and Bidirectional Trade Flows: Empirical Evidence on Ghana

Although the empirical findings on the impact of exchange rate volatility on trade is diverse, the growing consensus in the literature appears to suggest that for developing economies, the theoretically expected negative relationship almost always exists. The paper takes a different approach to empirically assess this relationship by analysing the impact of exchange rate volatility independently on total trade, imports and exports. The intuition behind this approach is to assess exactly how exporters and importers are incentivised (differently or similarly) by exchange rate volatility costs. Whereas adequately risk-aversed Ghanaian exporters in the presence of higher exchange rate volatility and the absence of hedging facilities effectively compensated against exchange rate risk by increasing volume of exports, import decisions were to some extent (although not effectively) negatively affected by exchange rate volatility. The different responses by Ghanaian exporters and importers to higher exchange rate volatility costs are reflected in the relationship between volatility and total trade. The useful policy lessons and the challenges that the empirical evidence present are discussed.     

Does industrial concentration impact on the relationship between policies and volatility?

It is usually recommended that countries diversify their economies to guard against any negative shocks that might impact on one industry. However, previous research has not identified how concentration can impact on the effectiveness of macroeconomic policies. This paper attempts to evaluate the relationship between industrial concentration, policies and economic volatility for a sample of 147 countries for the period 1970 to 2005. The study reports that less concentrated countries tend to have lower rates of output, consumption and investment growth volatility. In addition, while trade and capital account openness variables alone tend to diminish economic volatility, in concentrated economies opening both the capital and trade account can increase economic volatility.     

Terms of trade and economic growth in Japan and Korea: an empirical analysis

This study examines the impact of terms of trade and terms of trade volatility on economic growth in Japan and Korea using time series data. The results of the Johansen (1988) cointegration method show that real gross domestic product (GDP) per capita and terms of trade are jointly determined. Generally, an increase in terms of trade volatility will lead to a decrease in real GDP per capita. An increase in oil price will lead to a decrease in terms of trade. The results of the generalised forecast error variance decompositions show that the important contributors to real GDP per capita are different between Japan and Korea. A favourable and a less volatile terms of trade are important for economic growth.     

Regional output growth synchronisation with the Euro Area

This paper investigates the patterns and determinants of the co-movement of economic activity between regions in the European Union and the Euro Area. We use a panel dataset of 208 regions over the period 1989–2002 and estimate a system of simultaneous equations to analyse the impact of regional trade integration, industry specialisation and exchange rate volatility on regional output growth synchronisation with the Euro Area. We find that deeper trade integration with the Euro Area had a strong direct positive effect on the synchronisation of regional output growth with the Euro Area. Industrial specialisation and exchange rate volatility were sources of cyclical divergence. Industrial specialisation had however an indirect positive effect on regional output growth synchronisation via its positive effect on trade integration, while exchange rate volatility had an indirect additional negative effect on regional output growth synchronisation by reducing trade integration.     

IMPACT OF EXCHANGE RATE UNCERTAINTY ON COMMODITY TRADE BETWEEN THE US AND AUSTRALIA*

Exchange rate volatility is said to have negative or positive effect on trade flows. Previous studies that considered the impact of exchange rate uncertainty on the trade flows of Australia employed trade data either between Australia and rest of the world or between Australia and her few major trading partners. They were unable to discover any significant impact. In this paper when we disaggregate trade data by commodity between Australia and one of her major trading partners, the US, we find exchange rate volatility to have short‐run effects on trade flows of most industries. However, the short‐run effects last into long run, only in limited cases, though more in export commodities than import ones.     

Exchange rate volatility and international trade: International evidence from the MINT countries

This paper examines the effect of exchange rate volatility on international trade volumes for Mexico, Indonesia, Nigeria, and Turkey. We use volatility predicted from GARCH models for both nominal and real effective exchange rate data. To detect the long-term relationship we use the autoregressive distributed lag (ARDL) bound testing approach, while for the short-term effects, Granger causality models are employed. The results show that, in the long term, there is no linkage between exchange rate volatility and international trade activities except for Turkey, and even in this case, the magnitude of the effect of volatility is quite small. In the short term, however, a significant causal relationship from volatility to import/export demand is detected for Indonesia and Mexico. In the case of Nigeria, unidirectional causality from export demand to volatility is found, while for Turkey, no causality between volatility and import/export demand is detected.