Impact Of Exchange Rate Uncertainty Research Articles

The Impact of Exchange-Rate Uncertainty on Export Growth: Evidence from Korean Data

The statistical relationship between exports and real exchange-rate uncertainty has been examined extensively in recent years for a variety of industrial countries. However, very little, if any, work has been done on developing economies. In this paper, we investigate this relationship for the developing economy of Korea, using multivariate cointegration and error-correction techniques. The major result suggests that real exchange-rate uncertainty has a negative effect on exports in the short-run as well as the long-run. [F14, F31]

INTERNATIONAL PRODUCTION, INVESTMENT AND BORROWING WITH EXCHANGE RATE RISK AND FUTURES MARKETS

ABSTRACTIn this paper we consider a multinational firm under exchange rate and interest rate risks in a multiperiod model. We analyze the impact of exchange rate uncertainty and the use of currency futures on the risk‐averse firm's decisions about home and foreign production. Without any hedging markets exchange rate risk lowers foreign investment and output. However, when futures markets exist, the separation property holds. Introducing another source of uncertainty, such as the interest rate, which is nondiversifiable, affects the production in both countries, i.e., the separation property does not hold. However, we show that the adverse effect of the missing financial market (to hedge against this additional risk) disappears when international borrowing is available.

Exchange rate volatility and Pakistan's exports to the developed world, 1974–85

The paper attempts to estimate the impact of exchange rate uncertainty on Pakistan's exports to the developed world for 1974–85, discovering strong evidence to suggest that exports were adversely affected by the increased variability of its bilateral exchange rates. Unlike much of the recent evidence on developed countries, however, it is the variability in nominal rather than real exchange rates that is significant. The computations also suggest the presence of strong third-country effects.