Exchange Rate Sensitivity of U.S. Trade Flows: Evidence from Industry Data

Previous research that investigated the relation between U.S. trade flows and the value of the dollar either employed trade data between the United States and the rest of the world or between the United States and her major trading partners. In this paper we use monthly import and export data from 66 industries in the United States SITC Commodity Groupings over the January 1991-August 2002 period as well as cointegration analysis and show that in the long run real depreciation of the dollar stimulates export earnings of many U.S. industries, whereas it has no significant impact on most importing industries.     

Exchange rate volatility and US commodity trade with the rest of the world

Exchange rate volatility is argued to affect the trade flows negatively and positively. Indeed, empirical studies that have addressed the issue have supported both effects. These studies have used aggregate trade flows data either between one country and the rest of the world or between two countries at the bilateral level. Studies that have disaggregated trade data by industry are rare. Thus, we extend the literature by looking at the experiences of 66 American industries that trade with the rest of the world using monthly data. In most cases, trade flows are not affected by GARCH‐based volatility of the real effective exchange rate of the dollar.