Exchange Rate Risk and Uncertainty and Trade Flows: Asymmetric Evidence from Asia

摘要

Very recently, the link between exchange rate volatility and trade flows has entered intoa new direction in which researchers assess the possibility of asymmetric response of trade flowsto a measure of exchange rate uncertainty. We add to this literature by estimating a linear and anonlinear ARDL model to learn about the experiences of Asian countries, i.e., Pakistan, Japan, China,Korea, Singapore, Malaysia, the Philippines, and India. Like other studies in the literature, nonlinearmodels yielded relatively more significant results. In some cases, while the linear models showed nosignificant effects of exchange rate volatility on trade flows, the nonlinear models revealed significanteffects. In some other cases, the opposite was true.