The Effect Of Exchange Rate Volatility On Exports

Table of Contents

Chapter 1 : Introduction

Chapter 2 : Literature Review

2.1 Relationship between Exchange Rate Volatility and Trade

2.2 Effect of Exchange Rate Regimes

2.3 Exchange Rate Target Zones

2.4 Inflation Targeting and Exchange Rate Volatility

Chapter 3 : The Model and Data

3.1 Real Exports

3.2 Gross Domestic Product

3.3 Real Bilateral Exchange Rate

3.4 Volatility

3.5 Predictions of the model

3.6 Data sources

Chapter 4 : Tests

4.1 Unit Root Tests

4.2 Co-integration Tests

Chapter 5 : Empirical Results and Discussion

5.1 Summary Statistics

5.2 GARCH effects in the Real Exchange Rate

5.3 GARCH (1, 1) coefficients

5.4 Time series graphs

5.5 Unit Root Tests

5.6 Lag Order Selection

5.7 Co-integration Test

5.8 The VAR Model

Chapter 6 : Limitations of the study and Improvements

Chapter 7 : Conclusion

Research Objectives and Focus

The primary objective of this thesis is to examine the impact of real exchange rate volatility between the Canadian and US dollars on the real exports from Canada to the United States using quarterly data covering the period from 1960 to 2017 to determine if exchange rate uncertainty significantly hinders bilateral trade.

• Analysis of the relationship between exchange rate volatility and international trade.
• Evaluation of GARCH (1, 1) modeling for exchange rate volatility.
• Application of VAR models and Granger causality to assess short-run dynamics.
• Investigation into the influence of US economic activity on Canadian export performance.

Auszug aus dem Buch

Summary of Chapters

Chapter 1 : Introduction: Provides an overview of the thesis objectives, the context of Canada-US trade relations, and the motivation for studying exchange rate volatility.

Chapter 2 : Literature Review: Discusses existing theoretical and empirical literature concerning exchange rate volatility, trade, various exchange rate regimes, and inflation targeting.

Chapter 3 : The Model and Data: Details the empirical model used, the definitions of variables such as real exports and exchange rates, and outlines data sources.

Chapter 4 : Tests: Explains the econometric methodology, specifically focusing on unit root tests and co-integration testing frameworks.

Chapter 5 : Empirical Results and Discussion: Presents the findings from the statistical analysis, including GARCH estimations, VAR model results, and diagnostic tests.

Chapter 6 : Limitations of the study and Improvements: Outlines the constraints of the current research and suggests potential paths for future investigations.

Chapter 7 : Conclusion: Summarizes the key findings, confirming that exchange rate volatility has no statistically significant effect on Canadian exports to the US.

Keywords

Exchange Rate Volatility, Canadian Exports, United States, GARCH (1, 1), VAR Model, Real Bilateral Exchange Rate, Unit Root Tests, Co-integration, Granger Causality, Trade Performance, Inflation Targeting, Economic Activity, Industrial Production, Forecasting, Time Series Analysis.

Frequently Asked Questions

What is the fundamental goal of this thesis?

The thesis aims to determine whether real exchange rate volatility between the Canadian dollar and the US dollar significantly affects the volume of real exports from Canada to the United States.

What are the central thematic areas covered in the study?

The study covers exchange rate volatility, international trade flows, the impact of different exchange rate regimes, and monetary policy frameworks like inflation targeting.

Which scientific methods are applied in the research?

The research employs the GARCH (1, 1) model for volatility, ADF and Phillips-Perron unit root tests, and Vector Auto regression (VAR) modeling to analyze short-run relationships.

What is the core focus of the empirical analysis?

The empirical analysis focuses on quarterly data from 1960 to 2017 to perform Granger causality tests, impulse response functions, and variance decomposition of export data.

What primary conclusions does the author reach?

The author concludes that exchange rate volatility does not have a statistically significant effect on Canadian exports to the US in the short-run, contradicting the common hypothesis that such volatility hinders trade.

Which keywords best characterize this academic work?

Key terms include Exchange Rate Volatility, Canadian Exports, GARCH (1, 1), VAR Model, Granger Causality, and Real Bilateral Exchange Rate.

How is the Canadian dollar's performance relative to the US dollar contextualized?

The thesis contextualizes the currency's performance by noting the regime shift from the Bretton Woods gold standard to a floating system and the influence of major financial crises.

Does the study support the introduction of a common currency in North America?

No, the study argues that because exchange rate volatility does not significantly reduce Canadian exports to the US, the volatility concern should not be used as a primary justification for a common currency.