The Role of Exchange Rate Volatility on Trade Flows: an Empirical Panel Study on South American Economies

This thesis emphasizes, in particular, on the influence of exchange rate fluctuations on goods exports in South American economies by making use of a panel Vector Error Correction Model. In line with the majority of existing empirical evidence and literature, the results suggest that there is both a short run and a long run significant, negative relationship between exchange rate volatility and goods exports at an aggregated level. However, the results from multiple robustness checks, consisting of alternative operational measures of volatility, suggest that there is ambiguity to some extent with respect to the volatility-trade nexus. Moreover, a country-specific analysis shows that the volatility effects on the export industries of key importance are wavering in both direction and magnitude. This research contributes to a voluminous body of empirical work on the volatility-trade nexus, while fulfilling an exceptional role in the choice of the panel countries and in its idiosyncratic analysis in a disaggregated context.