نوسانات نرخ ارز و صادرات ایالات متحده: شواهد و مدارک استفاده شده از کانادا و ژاپن

This paper investigates the influence of exchange rate volatility on the real exports of the United States to Canada and Japan during the current flexible exchange rate period (1974–1998). The Johansen multivariate cointegration method and the constrained error correction (general-to-specific) method are applied to study the relationship between real exports and its determinants (including exchange rate volatility). Conditional variance from the GARCH(1,1) model is applied as exchange rate volatility. Both nominal and real exchange rates are employed in the empirical study. Results indicate a significant effect of the exchange rate volatility on real exports. These exchange rate volatility effects are mostly negative. J. Japanese Int. Economies19 (1) (2005) 51–71.

One of the major concerns since the introduction of the flexible exchange rate has been whether the increase in exchange rate variability (uncertainty) has affected the international trade flow. Higher exchange rate volatility leads to higher cost for risk-averse traders and to less foreign trade (Arize et al., 2000). In other words, greater exchange risk increases the riskiness of trade profits, leading risk-averse traders to reduce trade. Thus, a theoretical framework seems to indicate a negative relationship between international trade flow and exchange rate variability.1 Some studies such as Coes, 1981, Cushman, 1983, Akhtar and Spence Hilton, 1984, Thursby and Thursby, 1987, Kenen and Rodrik, 1986, Maskus, 1986, De Grauwe, 1988, Chowdhury, 1993, Arize, 1995, Arize, 1998 and Arize et al., 2000 do provide evidence that exchange rate variability does reduce international trade flow. According to Arize (1998), knowledge of the degree to which exchange rate volatility affects trade is important for the design of both exchange rate and trade policies. For example, if exchange rate volatility leads to a reduction in exports, trade adjustment programmes that emphasized export expansion could be unsuccessful if exchange rate is volatile. In addition, the intended effect of a trade liberalization policy may be doomed by a variable exchange rate and could precipitate a balance-of-payment crisis Arize, 1998 and Arize et al., 2000. The purpose of this paper is to investigate the effects of the exchange rate variability (volatility) on United States exports to Canada and Japan during the current flexible exchange rate period. Some previous studies have also reported indicating no or very little significant effect of the exchange rate variability on international trade. Bailey et al. (1987) claim that earlier studies conducted during the 1970s fail to find a significant effect of the exchange rate variability on international trade simply due to the lack of enough flexible exchange rate period data.2Bailey et al., 1986 and Bailey et al., 1987 fail to find any significant effect of the exchange rate variability on the trade flow of seven OECD countries. A similar result is also provided by Gotur, 1985, Aschheim et al., 1987, Koray and Lastrapes, 1989 and Gagnon, 1993. An empirical investigation by the IMF (1984) covering exports from the seven large industrial countries produces only two cases where the effect is significant and negative. Asseery and Peel, 1991, Franke, 1991, Giovannini, 1988, Sercu and Vanhulle, 1992 and Dellas and Zillberfarb, 1993 have shown that exchange rate variability imposes a positive effect on international trade. These studies consider international trade as an option held by firms. Like any other option, the value of trade may rise with volatility. De Grauwe (1988) shows the relationship between exchange rate volatility and trade flows is analytically indeterminate. As indicated by Arize, 1995 and Arize et al., 2000, conflicting results imply the effect of exchange rate variability on international trade is uncertain and requires more empirical and theoretical research. As stated above, this paper empirically investigates the relationship between exchange rate variability (volatility) and the United States export to Canada and Japan. In this paper the exchange rate variability is measured using the univariate GARCH model. The paper also applies the multivariate cointegration method and constrained error correction models to study the stated relationship. Furthermore, monthly data is applied as compared to the popular quarterly data or annual data, and a relatively longer period is covered than most other papers.3McKenzie (1999) emphasized a few key points in future research in this field. First, the need for care in specifying the technique by which exchange rate volatility is measured, with increased attention to the application of the GARCH and related models. Second, application of data disaggregated by sector, market and time period. Third, the need to apply proper methods necessary to correct prospective problems of serial correlation and nonstationarity in time series data.

One of the major concerns since the introduction of the flexible exchange rate has been whether the increase in exchange rate variability (uncertainty) has affected the international trade flow. This paper investigates the effects of the exchange rate variability (volatility) on the United States exports to Canada and Japan during the current flexible exchange rate period (1974–1998). In this paper, conditional variance of the first difference of the log of the exchange rate is applied as volatility (variability). The conditional variance is estimated from a univariate GARCH(1,1) model. The paper then applies the multivariate cointegration method and constrained error correction models to study the relationship between real exports and its determinants that is real income, export price ratio and exchange rate volatility. For both Canada and Japan, volatility of two different exchange rates are applied in empirical tests. Both the volatility of the nominal and the real rate between the United States dollar and the currencies of Canada and Japan are employed. Results obtained indicate a stationary long-run equilibrium relationship between real exports and its determinants for both Canada and Japan using all the two exchange rates volatility. Normalized equations indicate that in the majority of the relationships exchange rate volatility imposes a negative effect on real exports. This result may imply that exchange rate variability measured by volatility dampens international trade flows from the United States to Canada and Japan. Further analysis is conducted by means of Hendry's (1987) general-to-specific error correction (causality) tests. Error corrections also show that causality does exist from the exchange rate volatility to real exports. This is true using both the nominal and the real exchange rate volatility. Also causality from volatility to real export is also found in the short-run. Evidence of causality from all the determinants to real exports is found in the majority of the tests. The results presented suggest that exchange rate volatility considerations are important for modelling United States export behaviour to Canada and Japan. If policy makers ignore the stability of the nominal and real exchange rate between the United States dollar and Canada/Japan currencies, policy actions aimed at stabilizing these export markets are likely to generate uncertain results. Results presented in this paper advocate further research in this field using data from other countries.