Exchange rate volatility,sectoral trade,and the aggregation bias |
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Authors: | Email author" target="_blank">Nicolas?PéridyEmail author |
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Institution: | (1) Laboratoire d'Economie de Nantes (LEN), University of Nantes, B.P. 52231, F-44322 Nantes Cedex 3 |
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Abstract: | This paper proposes a sectoral theoretical model in an imperfect competition framework, with country-specific and industry-specific
original variables, notably factor productivity, scale economies, or product differentiation. It is then empirically estimated
in a panel data model, at a sectoral and geographical disaggregation level, to test the impact of exchange rate volatility
on G-7 countries' exports. Economies of scale are estimated from a non-linear translog production system. Two exchange rate
volatility measurements have been used: the moving sample standard deviation and the GARCH approach. The main finding shows
that the impact of exchange rate volatility on exports varies considerably, depending on the industry covered and the export
destination markets. As a consequence, there is both a sectoral and geographical aggregation bias when estimating the effects
of exchange rate variations. JEL no. F1, F12, F14 |
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Keywords: | Exchange rate volatility trade GARCH models translog panel data |
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