Premium
Exchange Rate Uncertainty and Trade between the United States and Canada: Evidence from 152 Industries
Author(s) -
BahmaniOskooee Mohsen,
Bolhassani Marzieh
Publication year - 2012
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/j.1759-3441.2012.00162.x
Subject(s) - cointegration , exchange rate , economics , international economics , short run , international trade , econometrics , monetary economics
In this article we try to assess the impact of exchange rate uncertainty on trade flows between the United States and Canada. However, unlike previous research on the two countries, we use disaggregated trade data for 152 industries. By using the bounds testing cointegration approach, which distinguishes short‐run effects from long‐run effects, we find that in the short run, trade flows of almost two‐thirds of the industries are affected by exchange rate uncertainty. However, in the long‐run, less than one‐third of the trade flows are affected. Almost all industries that are affected by exchange rate uncertainty are found to be small, except for road motor vehicles – which makes up 20 per cent of both imports and exports. Exports and imports of this largest industry are adversely affected by exchange rate uncertainty.