Premium
The Effects of Exchange‐Rate Volatility on Korean Trade Flows: Industry‐Level Estimates
Author(s) -
BahmaniOskooee Mohsen,
Hegerty Scott W.,
Zhang Ruixin
Publication year - 2014
Publication title -
economic papers: a journal of applied economics and policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.245
H-Index - 19
eISSN - 1759-3441
pISSN - 0812-0439
DOI - 10.1111/1759-3441.12064
Subject(s) - exchange rate , volatility (finance) , international economics , balance of trade , economics , monetary economics , rest (music) , international trade , business , econometrics , medicine , cardiology
As one of the world's most important exporters, Korea might find volatility in the won to be detrimental to trade. But, since previous studies – as well as economic theory – suggest that the impact of exchange‐rate risk on individual countries trade flows can be ambiguous, each case must be tested empirically. This study does, examining 148 Korean export industries and 144 import industries vis‐à‐vis the rest of the world. We find that in the long run, twenty export industries respond negatively to exchange‐rate risk, while twelve respond positively. For imports, however, eight have negative coefficients and fourteen have positive ones. The majority of industries are unaffected. Small Korean exporters are particularly vulnerable to exchange‐rate risk, as are two large export industries. Imports in the Machinery and transport equipment sector, particularly automobiles, are most likely to see a decrease in the overall trade balance due to increased risk.