The aim of this paper is to analyze the effects of exchange rate volatility oninternational trade fl ows by using two different approaches, the panel dataanalysis and fuzzy logic, and to compare the results. To a panel with the crosssectiondimension of 91 pairs of EU15 countries and with time ranging from 1964to 2003, an extended gravity model of trade is applied in order to determine theeffects of exchange rate volatility on bilateral trade fl ows of EU15 countries. Theestimated impact is clearly negative, which indicates that exchange rate volatilityhas a negative infl uence on bilateral trade fl ows. Then, this traditional panelapproach is contrasted with an alternative investigation based on fuzzy logic. Thekey elements of the fuzzy approach are to set fuzzy decision rules and to assignmembership functions to the fuzzy sets intuitively based on experience. Bothapproaches yield very similar results and fuzzy approach is recommended to beused as a complement to statistical methods.
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