CPB / Bas Straathof : Currency derivatives and the disconnect between exchange rate volatility and international trade
arthur garbayo
Currency derivatives and the disconnect between exchange rate volatility and international trade
Exchange rate risk will only have a small effect on international transactions as long as this risk is easily tradable. We find evidence indicating that the availability of currency futures can explain the relatively small impact of exchange rate volatility on trade.
The impact of exchange rate volatility on international trade is small for industrialized countries, especially since the late 1980s. An explanation for this is Wei’s (1999) “hedging hypothesis”, which states that the availability of currency derivatives has changed the relation between exchange rate volatility and trade. Exchange rate risk will only have a small effect on international transactions as long as this risk is easily tradable. We find evidence indicating that the availability of currency futures can explain the relatively small impact of exchange rate volatility on trade.
Bas Straathof his research activities include IPR reform (including patents), innovation, executive compensation, international economics, and economic geography. He is also affiliated with the University of Groningen and the Institute for Fiscal Studies.
Para ter mais informação acesse estes portais: www.desenvolvimentistas.com.br e http://www.joserobertoafonso.ecn.br/