Exchange-rate volatility and industry trade between Canada and Mexico

Mohsen Bahmani-Oskooee, Marzi Bolhassani, Scott Hegerty

Research output: Contribution to journalArticle

13 Scopus citations

Abstract

While it has long been assumed that exchange-rate volatility introduces a level of uncertainty that helps reduce trade flows, this need not be the case for particular country pairs or for specific products. This study examines the case of trade between Canada and Mexico-two members of the highly integrated North American market. Trade flows are examined for a number of specific products using the "bounds testing" cointegration approach over the period from 1973 to 2006. Relatively few industries see a long-run reduction in trade volumes due to volatility. This indicates that multinational producers in these integrated markets might be able to hedge against exchange-rate risk. Since major Mexican exports appear to see the largest reductions, Mexico might have a stronger incentive to reduce the volatility of the peso.

Original languageEnglish (US)
Pages (from-to)389-408
Number of pages20
JournalJournal of International Trade and Economic Development
Volume21
Issue number3
DOIs
StatePublished - Jun 1 2012

All Science Journal Classification (ASJC) codes

  • Geography, Planning and Development
  • Development
  • Aerospace Engineering

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