Register  |  Login  |  Inquiries  |  Sitemap
Advanced Search
Journal of Economic Integration 2005 September;20(3) :567-589.
DOI: https://doi.org/10.11130/jei.2005.20.3.567
The Impact of the Exchange Rate Regime on Exports: Evidence from the European Monetary System
Stilianos Fountas and 
Kyriacos Aristotelous 
University of Macedonia
Otterbein College
Copyright ©2005 Journal of Economic Integration
ABSTRACT
We employ the econometric techniques of multivariate cointegration and error-correction models to investigate the impact of the creation of the European Monetary System (EMS) on the volume of intra-European Union (EU) exports for eight EU countries. We find that for Ireland the EMS boosted the volume of intra-EU exports, whereas for Belgium, Denmark, and Germany, the EMS led to a decline in intra-EU exports. In the rest of the countries, there has not been a significant effect. Another important result is that, more often than not, the short-run impact of exchange rate volatility on the volume of intra-EU exports is insignificant.

JEL Classification
F14: Empirical Studies of Trade
F33: International Monetary Arrangements and Institutions
Keywords: Exchange rate regime | Exchange Rate Volatility | Exports | European monetary system
 
REFERENCE
1. Aristotelous, K. and S. Fountas, 1996, An empirical analysis of inward foreign direct investment flows in the EU with emphasis on the market enlargement hypothesis, Journal of Common Market Studies 34, 571-583.
2. Aristotelous, K. and S. Fountas, 2000, The Impact of the Exchange Rate Regime on Exports: Evidence from bilateral exports in the European Monetary System, Journal of Economic Integration 15, 506-526.
3. Arize, A.C., 1995, The Effects of Exchange Rate Volatility on U.S. Exports: An Empirical Investigation, Southern Economic Journal 62, 34-43.
4. Asseery, A. and D.A. Peel, 1991, The Effects of Exchange Rate Volatility on Exports-Some New Estimates, Economics Letters 37, 173-177.
5. Bini-Smaghi, L., 1991, Exchange Rate Variability and Trade: Why Is It So Difficult to Find any Empirical Relationship?, Applied Economics 23, 927-935.
6. Brada J. and J. Mendez, 1988, Exchange rate risk, exchange rate regime and the volume of international trade, Kyklos 41, 263-280.
7. Chowdhury, A.R., 1993, Does Exchange Rate Volatility Depress Trade Flows? Evidence from Error-Correction Models, The Review of Economics and Statistics 75, 700-706.
8. Cote, A., 1994, Exchange Rate Volatility and Trade, Bank of Canada Working Paper 5.
9. De Grauwe, P., 1987, International Trade and Economic Growth in the European Monetary System, European Economic Review 31, 389-398.
10. De Grauwe, P., 1988, Exchange Rate Variability and the Slowdown in Growth of International Trade, IMF Staff Papers 35, 63-84.
11. De Grauwe, P., 1996, International Money (Oxford University Press, Oxford).
12. De Grauwe, P., 2000, Economics of Monetary Union (Oxford University Press, Oxford).
13. De Nardis, S. and C. Vicarelli, 2003, Currency unions and trade: the special case of EMU, Weltwirtschaftliches Archiv, 625-649.
14. Enders, W. 1995, Applied Econometric Times Series (Wiley, New York).
15. Engle, R., and C. W. J. Granger, 1987, Cointegration and Error-Correction: Representa-tion, Estimation, and Testing, Econometrica 55, 251-276.
16. Fountas, S. and K. Aristotelous, 1999, Has the European Monetary System Led to More Exports ? Evidence from Four European Union Countries, Economics Letters 62, 357 -363.
17. Franke, G., 1991, Exchange Rate Volatility and International Trading Strategy, Journal of International Money and Finance 10, 292-307.
18. Frankel, J. and A. Rose, 2002, An estimate of the effect of common currencies on trade and income, The Quarterly Journal of Economics 117(2), 437-466.
19. Giovannini, A., 1988, Exchange Rates and Traded Goods Prices, Journal of International Economics 24, 45-68.
20. Glick, R. and A. Rose, 2002, Does a currency union affect trade? The time-series evidence, European Economic Review 46, 1125-1151.
21. Gonzalo, J., 1994, Five Alternative Methods of Estimating Long-Run Equilibrium Relationships, Journal of Econometrics 60, 203-233.
22. Gotur, P., 1985, Effects of Exchange Rate Volatility on Trade: Some Further Evidence, IMF Staff Papers 32, 475-512.
23. Granger, C. W. J. and P. Newbold, 1974, Spurious Regression in Econometrics, Journal of Econometrics 2, 111-120.
24. Gros, D. and N. Thygesen, 1998, European Monetary Integration, (Longman, Essex).
25. International Monetary Fund, 1984, Exchange Rate Volatility and World Trade, Occasional Paper No. 28.
26. Lastrapes, W.D. and F. Koray, 1990, Real Exchange Rate Volatility and US Multilateral Trade Flows, The Journal of Macroeconomics 12, 341-362.
27. McKenzie, M. D., 1999, The Impact of Exchange Rate Volatility on International Trade Flows, Journal of Economic Surveys 13, 71-106.
28. Micco, A., Stein, E., Ordonez, G. 2003, The currency union effect on trade: early evidence from EMU, Economic Policy 37, 315-356.
29. Phillips, P. C. B., 1991, Optimal Inference in Cointegrated Systems, Econometrica 59, 283-306.
30. Pozo, S., 1992, Conditional Exchange Rate Volatility and the Volume of International Trade: Evidence from the Early 1900s, The Review of Economics and Statistics 74, 325-329.
31. Rose, A. 2000, One money, one market: the effect of common currencies on trade, Economic Policy 30, 7-46.
32. Rose, A. 2001, Currency unions and trade: the effect is large, Economic Policy 33, 449-461.
33. Rose, A. 2004, A meta-analysis of the effect of common currencies on international trade, Unpublished manuscript.
34. Rose, A. and E. van Wincoop, 2001, National money as a barrier to international trade: the real case for currency union, American Economic Review 91(2), 386-390.
35. Sereu, P. and C. Vanhulle, 1992, Exchange Rate Volatility, Exposure and the Value of Exporting Firms, Journal of Banking and Finance 16, 155-182.
36. Stock, J., 1987, Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors, Econometrica 55, 1035-1056.
37. Stokman, A. C. J. 1995, Effect of Exchange Rate Risk on Intra-EC Trade, De Economist143, 41-54.
38. Thursby, J, and M. Thursby, 1987, Bilateral Trade Flows, the Linder Hypothesis, and Exchange Risk, The Review of Economics and Statistics 69, 488-495.
39. Viaene, J-M. and C. de Vries, 1992, International Trade and Exchange Rate Volatility, European Economic Review 36, 1311-21.
Editorial Office
Center for Economic Integration, Sejong Institution, Sejong University, 209, Neungdong-Ro, Gwangjin-Gu,
Seoul, 05006, Korea
TEL : +82-2-3408-3338    FAX : +82-2-3408-3338   E-mail : jei@sejong.ac.kr
Browse Articles |  Current Issue |  For Authors and Reviewers |  About
Copyright© by Center for Economic Integration. All right reserved.