Working Paper

Is the Effect of Exchange Rate Volatility on Trade More Pronounced in Latin America than in Asia?

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This paper empirically investigates the impact of exchange rate volatility on East and
Southeast Asian and Latin American exports from 1980 to 2004 by using a gravity model and
panel data. The results show that exchange rate volatility negatively affects exports in both
continents. However, the impact of exchange rate volatility is more pronounced in Latin
America than in Asia for the whole sample period 1980-2004 and in the sub-period 1980-
1996, but not in the sub-period 1997-2004. Moreover, the results also show that countries
with relatively high tariffs are less vulnerable to exchange rate volatility than open economies.
Finally, evidence reveals that exports from high-income countries are less affected by
exchange rate volatility.


Dieter Billen
Maria Melody Garcia
Nelli Khasanova


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