How Does Exchange-Rate Volatility Affect Inpayments and Outpayments at Industry Level: Evidence From Commodity Trade Between Germany and the United States
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Description
Although an increasing number of studies have looked at the impact of exchange rate changes on inpayments, and outpayments, they did not consider the impact of exchange rate volatility. This paper adds to the existing literature by investigating whether exchange rate volatility has symmetric or asymmetric impacts on a country’s inpayments and outpayments. We use disaggregated data for 67 industries that trade between Germany and the U.S, and estimate symmetric, and asymmetric error-correction models (ECM).With symmetric ECM, we found short-run effects of the real dollar-euro rate volatility on inpayments of 40 U.S. exporting industries and on outpayments of 43 U.S. importing ones. These short-run effects translated into the long run only in 4 of inpayment and 10 of outpayment models.