- 4
- Barkoulas, John, Christopher F Baum and Mustafa Caglayan (2002), Exchange rate effects on the volume and variability of trade flows, Journal of International Money and Finance, 21, 481–496.

Total in-text references: 7- In-text reference with the coordinate start=6223
- Prefix
- This observation should not be too surprising as the recent empirical literature has recorded similar findings. Furthermore, these results are in line with the theoretical literature. Our second set of findings is new and novel as we provide empirical support to another proposition suggested in
- Exact
- Barkoulas et al. (2002).
- Suffix
- Specifically, we show that exchange rate volatility has a meaningful empirical impact on thevolatilityof trade flows. We find that 84 out of 156 models tested provide support for a statistically significant steady-state effect of exchange rate volatility on trade volatility.

- In-text reference with the coordinate start=6733
- Prefix
- We obtain a positive and significant relationship in 76 models and a negative and significant relationship in only eight models. The rest of the paper is constructed as follows. Section 2 presents a variant of the
- Exact
- Barkoulas et al. (2002)
- Suffix
- model and provides a theoretical basis for the empirical analysis. Section 3 discusses the data set and the empirical model that we employ. Section 4 documents our empirical findings while Section 5 concludes and draws implications for future theoretical and empirical research. 3The sample considered ends in December 1998 at the launch of the Euro. 4A preliminary analysis on these series, treated

- In-text reference with the coordinate start=9221
- Prefix
- Maximization of equation (2) with respect toXyields the optimal level of exports: X= ̄e+ρ-t−1+λSt−d 1 +γλσ2ψ (3) where ̄e+ρ-t−1+λSt> dis assumed to be satisfied for an economically meaningful (positive) optimal level of exports. In contrast to other analytical studies,
- Exact
- Barkoulas et al. (2002)
- Suffix
- investigate the impact of exchange rate volatility on trade flows because trade flow volatility “directly relates to smoothing the business cycle, which is an important argument in the macro welfare function” (2002, p. 471).

- In-text reference with the coordinate start=9907
- Prefix
- Hence, the variance of exports can be shown to be: V ar(X) = λσ2ν ( 1 +γσ2ψλ )2(4) 2.1 Impact of exchange rate uncertainty Taking the derivatives of equations (3) and (4) with respect toσ2ν, we obtain simpler variants of the two relationships
- Exact
- Barkoulas et al. (2002)
- Suffix
- discuss in their study. The first relationship is the impact of uncertainty on trade flows: ∂X ∂σ2ν = σ2ψ ( σ2ψ+σ2ν )2 ( 1 +γλσ2ψ ) St+γσ2ψ(d−( ̄e+ρ-t−1+λSt)) ( 1 +γλσ2ψ )2.(5) This result implies that “[T]he effect of the variance of the stochastic elements in the fundamentals driving the exchange rate process on trade flows is ambiguous” (Barkoulas et al. (2002) p. 490) because the sign of the r

- In-text reference with the coordinate start=10256
- Prefix
- The first relationship is the impact of uncertainty on trade flows: ∂X ∂σ2ν = σ2ψ ( σ2ψ+σ2ν )2 ( 1 +γλσ2ψ ) St+γσ2ψ(d−( ̄e+ρ-t−1+λSt)) ( 1 +γλσ2ψ )2.(5) This result implies that “[T]he effect of the variance of the stochastic elements in the fundamentals driving the exchange rate process on trade flows is ambiguous”
- Exact
- (Barkoulas et al. (2002)
- Suffix
- p. 490) because the sign of the relationship depends on the behavior of the signalSt. Next we look at the impact of volatility of the fundamentals in the exchange rate process on the volatility of trade flows: ∂V ar(X) ∂σ2ν =λ (2−λ) +γλ2σ2ψ ( 1 +γλσ2ψ )3>0.(6) Here we have an unambiguous relationship: trade flow volatility is positively related to the variance of the fundamental forces driving the

- In-text reference with the coordinate start=30540
- Prefix
- rate volatilty on trade flow volatility is computed 14At the ten per cent level of significance, we find 30 nonzero coefficients: 14 positive, 16 negative. 13 as 100 ( βˆSS 1· ̄σ 2 st/ ̄σ 2 xt ) which expresses the impact as a percentage of the mean volatility of trade flows. The results we display here are new and novel as we provide empirical support to another proposition suggested in
- Exact
- Barkoulas et al. (2002)
- Suffix
- which has not been tested. Specifically, we show that exchange rate volatility has a meaningful empirical impact on thevolatilityof trade flows. We find that 84 out of 156 models tested provide support for a statistically significant steady-state effect of exchange rate volatility on trade volatility.

- In-text reference with the coordinate start=33701
- Prefix
- Given the earlier theoretical and empirical findings in the literature, these findings are not surprising. Our second set of findings is new and novel as we provide empirical support to a proposition of
- Exact
- Barkoulas et al. (2002).
- Suffix
- We empirically show that for 84 out of 156 potential models exchange rate volatility turns out to have a meaningful steady-state impact on the volatility of trade flows. In particular, we obtain a positive and significant relationship in 76 models and a negative and significant relationship in only eight models.

- In-text reference with the coordinate start=6223
- 5
- Baron, D.P. (1976), Fluctuating exchange rates and pricing of exports, Economic Inquiry, 14, 425–438.

Total in-text references: 1- In-text reference with the coordinate start=3586
- Prefix
- In contrast to these studies, this paper presents an empirical investigation motivated by the theoretical findings of Barkoulas, Baum and Caglayan (2002) that exchange rate uncertainty should have an impact on both thevolumeandvariabilityof trade flows. Our 1Several theoretical studies
- Exact
- (Ethier (1973), Clark (1973), Baron (1976),
- Suffix
- Peree and Steinherr (1989)) have shown that an increase in exchange rate volatility will have adverse effects on the volume of international trade. Others, including Franke (1991), Sercu and Vanhulle (1992) have shown that exchange rate volatility may have a positive or ambiguous impact on the volume of international trade flows depending on aggregate exposure to currency risk (Viaene and deVries

- In-text reference with the coordinate start=3586
- 9
- Bloem, Adriaan M., Dippelsman, Robert J., and Nils O. Maehle (2001), Quarterly National Accounts Manual: Concepts, Data Sources, and Compilation, Washington: International Monetary Fund.

Total in-text references: 1- In-text reference with the coordinate start=12570
- Prefix
- To match the monthly frequency of export data, we must generate a proxy for monthly foreign GDP as the available data is on a quarterly basis.5Hence, we apply the proportional Denton benchmarking technique
- Exact
- (Bloem et al., 2001) to
- Suffix
- the quarterly real GDP series in order to produce monthly GDP estimates. The proportional Denton benchmarking technique uses the higher-frequency movements of an associated variable in our case monthly industrial production as an interpolator within the quarter, while enforcing the constraint that the sum of monthly GDP flows equals the observed quarterly total. 3.1 Generating proxies for the vol

- In-text reference with the coordinate start=12570
- 10
- Clark, P.B. (1973), Uncertainty, exchange risk, and the level of international trade, Western Economic Journal, 11, 302–313.

Total in-text references: 1- In-text reference with the coordinate start=3586
- Prefix
- In contrast to these studies, this paper presents an empirical investigation motivated by the theoretical findings of Barkoulas, Baum and Caglayan (2002) that exchange rate uncertainty should have an impact on both thevolumeandvariabilityof trade flows. Our 1Several theoretical studies
- Exact
- (Ethier (1973), Clark (1973), Baron (1976),
- Suffix
- Peree and Steinherr (1989)) have shown that an increase in exchange rate volatility will have adverse effects on the volume of international trade. Others, including Franke (1991), Sercu and Vanhulle (1992) have shown that exchange rate volatility may have a positive or ambiguous impact on the volume of international trade flows depending on aggregate exposure to currency risk (Viaene and deVries

- In-text reference with the coordinate start=3586
- 11
- Ethier, W. (1973), International trade and the forward exchange market, American Economic Review, 63, 494–503.

Total in-text references: 1- In-text reference with the coordinate start=3586
- Prefix
- In contrast to these studies, this paper presents an empirical investigation motivated by the theoretical findings of Barkoulas, Baum and Caglayan (2002) that exchange rate uncertainty should have an impact on both thevolumeandvariabilityof trade flows. Our 1Several theoretical studies
- Exact
- (Ethier (1973), Clark (1973), Baron (1976),
- Suffix
- Peree and Steinherr (1989)) have shown that an increase in exchange rate volatility will have adverse effects on the volume of international trade. Others, including Franke (1991), Sercu and Vanhulle (1992) have shown that exchange rate volatility may have a positive or ambiguous impact on the volume of international trade flows depending on aggregate exposure to currency risk (Viaene and deVries

- In-text reference with the coordinate start=3586
- 12
- Franke, G. (1991), Exchange rate volatility and international trading strategy, Journal of International Money and Finance, 10, 292–307.

Total in-text references: 1- In-text reference with the coordinate start=3794
- Prefix
- Our 1Several theoretical studies (Ethier (1973), Clark (1973), Baron (1976), Peree and Steinherr (1989)) have shown that an increase in exchange rate volatility will have adverse effects on the volume of international trade. Others, including
- Exact
- Franke (1991),
- Suffix
- Sercu and Vanhulle (1992) have shown that exchange rate volatility may have a positive or ambiguous impact on the volume of international trade flows depending on aggregate exposure to currency risk (Viaene and deVries (1992)) and the types of shocks to which the firms are exposed (Barkoulas, Baum and Caglayan (2002)). 2Negative effects of exchange rate uncertainty on trade flows are recently repo

- In-text reference with the coordinate start=3794
- 13
- Gagnon, J. E. (1993), Exchange rate variability and the level of international trade, Journal of International Economics, 34, 269–287.

Total in-text references: 1- In-text reference with the coordinate start=4276
- Prefix
- a positive or ambiguous impact on the volume of international trade flows depending on aggregate exposure to currency risk (Viaene and deVries (1992)) and the types of shocks to which the firms are exposed (Barkoulas, Baum and Caglayan (2002)). 2Negative effects of exchange rate uncertainty on trade flows are recently reported by Arize, Osang and Slottje (2000), Sauer and Bohara (2001), while
- Exact
- Gagnon (1993)
- Suffix
- finds insignificant effects. Baum, Caglayan and Ozkan (2004) report that the impact of exchange rate volatility on export flows differs in sign and magnitude across the countries studied. 2 investigation concentrates on bilateral trade flows between a broad set of data that contains information from 13 countries including the U.

- In-text reference with the coordinate start=4276
- 15
- Karolyi, G. A. (1995), A multivariate GARCH model of international transmissions of stock returns and volatility: The case of the United States and Canada, Journal of Business and Economics Statistics, 13, 11–25.

Total in-text references: 1- In-text reference with the coordinate start=15780
- Prefix
- We assume that the errors are jointly conditionally normal with zero means and conditional variances given by anARMA(1,1)structure as expressed in equation (9). The system is estimated using the multivariateGARCH–BEKKmodel introduced by
- Exact
- Karolyi (1995)
- Suffix
- as implemented in RATS 6.10. 3.2 Modeling the dynamics of the mean and the variance of trade flows In this study, we investigate two sets of relationships. Both sets of relationships require us to introduce lags of the independent variables to capture the delayed effects in each relationship.

- In-text reference with the coordinate start=15780