نوسانات نرخ ارز و تجارت خارجی: مورد برای قبرس و کرواسی

This paper examines the effect of exchange rate volatility for a set of two countries, Croatia and Cyprus on sectoral exports during the period of 1990: q1-2012:q1. It is claimed by some researchers that exchange rate volatility causes a reduction on the overall level of trade. Empirical researchers often utilize the standard deviation of the moving average of the logarithm of the exchange rate as a measure of exchange rate fluctuation. In this study we propose a new measure for volatility. Overall our results have suggested significant negative effects from volatility on exports for one country in our sample.

The relationship between exchange rate volatility and export flows has been studied in a large number of theoretical and empirical papers. The main notion suggested by some theoretical models, is that a rise in exchange rate volatility increases uncertainty of profits on contracts denominated in foreign currency and force risk averse agents redirect their activity to the lower risk home market. Other models suggest that higher levels of exchange rate movements offer greater opportunity for profit and therefore might lead to an increase on exports. Alternatively some researchers have suggested since it is possible to offset potential unexpected movements of the exchange rate by investing at the forward market causing producers to be unaffected by movements of the exchange rate. These different ranges of results have been supported by a large variety of empirical studies causing the effects of exchange rate volatility on exports to be one of the most controversial topics of international trade.This paper aims to model the effects of exchange rate volatility for two countries for which empirical evidence is both limited and ambiguous and to utilize a new measure of volatility which captures unexpected movements of the exchange rate.The remainder of this paper will be organized as follows: First, the existing literature is analyzed; second,various measurement issues of exchange rate volatility are discussed; third, the data are presented; fourth, the methodological framework is also discussed; fifth, the results of the utilized statistical tests, the estimated equations and an analysis of the main empirical findings are discussed. Finally the last section addresses the issue of policy implications, and presents a brief summary as well as the main collusions.

In this study we have taken explicit account of nonstationarity and have applied a multivariate cointegration error correction model for two countries and two different measures of volatility. Each model satisfies several commonly utilized econometric tests in the analysis of time-series data such as cointegration and unit roots. Our empirical analysis suggests that although exchange rate volatility when measured as the simple standard deviation of the log effective exchange has no effect on the level of exports for both Croatia and Cyprus. However, when an alternative measure is used there is an indication of a stronger effect from movements of the exchange rate to the level of exports. As a result a negative statistical significant relationship is estimated for Croatia. From a policy prospective our results are important. They suggest that policy makers should consider volatility for some but not all countries when applying economic policy. More specifically, policy actions reducing unexpected fluctuation of the exchange rate, for one of our sample countries, will increase the exported amount. The actual reduction from such a policy is beyond the scope of this paper and will be addressed in future work.