The effects of exchange-rate volatility on commodity trade between the U.S. and Brazil

Mohsen Bahmani-Oskooee, Hanafiah Harvey, Scott W. Hegerty

Research output: Contribution to journalArticle

25 Citations (Scopus)

Abstract

As Brazil continues its emergence as a major world economy, it has enjoyed both increased trade and capital inflow-fueled currency appreciations. But while it is often thought that exchange-rate volatility hurts trade, the economic literature has found that this is not always true. This study examines bilateral export and import flows between the United States and Brazil from 1971 to 2010, using cointegration analysis to estimate the effects of this risk. This study arrives at three main conclusions. First, while the majority of industries are not affected by volatility in the long run, an unexpectedly large share of those that are affected responds positively to increased risk. Second, sensitivity to risk differs markedly by industry sector: Brazilian exports of agricultural products are particularly harmed, while U.S. machinery imports are not impacted at all. Finally, products with small trade shares more likely to respond to increased uncertainty than are major exporters.

Original languageEnglish (US)
Pages (from-to)70-93
Number of pages24
JournalNorth American Journal of Economics and Finance
Volume25
DOIs
StatePublished - Aug 1 2013

Fingerprint

Commodity trade
Exchange rate volatility
Brazil
Industry
Import
Uncertainty
Machinery
Currency
Exporters
World economy
Economics
Agricultural products
Bilateral
Capital inflows
Cointegration analysis

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Finance

Cite this

@article{95c16a972f674b9aa18f7e1d9eb2295d,
title = "The effects of exchange-rate volatility on commodity trade between the U.S. and Brazil",
abstract = "As Brazil continues its emergence as a major world economy, it has enjoyed both increased trade and capital inflow-fueled currency appreciations. But while it is often thought that exchange-rate volatility hurts trade, the economic literature has found that this is not always true. This study examines bilateral export and import flows between the United States and Brazil from 1971 to 2010, using cointegration analysis to estimate the effects of this risk. This study arrives at three main conclusions. First, while the majority of industries are not affected by volatility in the long run, an unexpectedly large share of those that are affected responds positively to increased risk. Second, sensitivity to risk differs markedly by industry sector: Brazilian exports of agricultural products are particularly harmed, while U.S. machinery imports are not impacted at all. Finally, products with small trade shares more likely to respond to increased uncertainty than are major exporters.",
author = "Mohsen Bahmani-Oskooee and Hanafiah Harvey and Hegerty, {Scott W.}",
year = "2013",
month = "8",
day = "1",
doi = "10.1016/j.najef.2013.03.002",
language = "English (US)",
volume = "25",
pages = "70--93",
journal = "North American Journal of Economics and Finance",
issn = "1062-9408",
publisher = "Elsevier Inc.",

}

The effects of exchange-rate volatility on commodity trade between the U.S. and Brazil. / Bahmani-Oskooee, Mohsen; Harvey, Hanafiah; Hegerty, Scott W.

In: North American Journal of Economics and Finance, Vol. 25, 01.08.2013, p. 70-93.

Research output: Contribution to journalArticle

TY - JOUR

T1 - The effects of exchange-rate volatility on commodity trade between the U.S. and Brazil

AU - Bahmani-Oskooee, Mohsen

AU - Harvey, Hanafiah

AU - Hegerty, Scott W.

PY - 2013/8/1

Y1 - 2013/8/1

N2 - As Brazil continues its emergence as a major world economy, it has enjoyed both increased trade and capital inflow-fueled currency appreciations. But while it is often thought that exchange-rate volatility hurts trade, the economic literature has found that this is not always true. This study examines bilateral export and import flows between the United States and Brazil from 1971 to 2010, using cointegration analysis to estimate the effects of this risk. This study arrives at three main conclusions. First, while the majority of industries are not affected by volatility in the long run, an unexpectedly large share of those that are affected responds positively to increased risk. Second, sensitivity to risk differs markedly by industry sector: Brazilian exports of agricultural products are particularly harmed, while U.S. machinery imports are not impacted at all. Finally, products with small trade shares more likely to respond to increased uncertainty than are major exporters.

AB - As Brazil continues its emergence as a major world economy, it has enjoyed both increased trade and capital inflow-fueled currency appreciations. But while it is often thought that exchange-rate volatility hurts trade, the economic literature has found that this is not always true. This study examines bilateral export and import flows between the United States and Brazil from 1971 to 2010, using cointegration analysis to estimate the effects of this risk. This study arrives at three main conclusions. First, while the majority of industries are not affected by volatility in the long run, an unexpectedly large share of those that are affected responds positively to increased risk. Second, sensitivity to risk differs markedly by industry sector: Brazilian exports of agricultural products are particularly harmed, while U.S. machinery imports are not impacted at all. Finally, products with small trade shares more likely to respond to increased uncertainty than are major exporters.

UR - http://www.scopus.com/inward/record.url?scp=84877353179&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84877353179&partnerID=8YFLogxK

U2 - 10.1016/j.najef.2013.03.002

DO - 10.1016/j.najef.2013.03.002

M3 - Article

AN - SCOPUS:84877353179

VL - 25

SP - 70

EP - 93

JO - North American Journal of Economics and Finance

JF - North American Journal of Economics and Finance

SN - 1062-9408

ER -