Hellenic Open University Conferences, International Conference on Business & Economics of the Hellenic Open University 2015

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Exchange Rate Volatility and International Trade: International Evidence from the MINT Countries
Dimitrios Asteriou, Keith Stephen Pilbeam, Kaan Masatci

Building: Titania
Room: Platon
Date: 2015-02-07 11:00 AM – 01:00 PM
Last modified: 2015-01-27

Abstract


The aim of this paper is to examine the effect of exchange rate volatility on international trade activities for four different countries. These are Mexico, Indonesia, Nigeria, and Turkey, which for short are henceforth called as MINT countries. The volatility series are predicted from GARCH models for both nominal and real effective exchange rate data. In order to detect this relation in long term, the autoregressive distributed lag (ARDL) – Bound testing approach is applied; while for the short term effects, Granger causality models are also utilised. The results show that, in long term, there is no linkage between exchange rate volatility and international trade activities for the majority of countries of interest except Turkey. Moreover, the magnitude of the effect of volatility is quite small in Turkey. In the short term, however, a significant causal relationship from volatility to import/export demand is detected for Indonesia and Mexico. Finally, for Nigeria unidirectional causality from export demand to volatility and for Turkey, no causality between volatility and import/ export demand is found.


Keywords


Exchange Rates, Interantional Trade, GARCH, Granger Causality