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Real Exchange Rate Volatility and U.S. Bilateral Trade: A Var Approach

Faik Koray and William D. Lastrapes
The Review of Economics and Statistics
Vol. 71, No. 4 (Nov., 1989), pp. 708-712
Published by: The MIT Press
DOI: 10.2307/1928117
Stable URL: http://www.jstor.org/stable/1928117
Page Count: 5
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Real Exchange Rate Volatility and U.S. Bilateral Trade:  A Var Approach
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Abstract

This paper uses VAR models to investigate the impact of real exchange rate volatility on U.S. bilateral imports from the United Kingdom, France, Germany, Japan and Canada. The VAR systems include U.S. and foreign macro variables, and are estimated separately for each country. The major results suggest that the effect of volatility on imports is weak, although permanent shocks to volatility do have a nega- tive impact on this measure of trade, and those effects are relatively more important over the flexible rate period.

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