An Empirical Analysis of Short-run and Long-run Irish Export Functions: Does exchange rate volatility matter?

We analyse the long-run and short-run relationship between merchandise export volume and its determinants, foreign income, relative prices and exchange rate volatility, using the techniques of cointegration and error correction. The model was estimated for Irish exports and sectoral exports SITC 0-4...

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Bibliographic Details
Published in:International review of applied economics 2003-04, Vol.17 (2), p.193-208
Main Authors: Bredin, Don, Fountas, Stilianos, Murphy, Eithne
Format: Article
Language:English
Subjects:
Applied economics
Economic models
Economics
Empirical research
Exchange rates
Exports
Foreign exchange rates
International trade
Ireland
Studies
Volatility
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Summary:We analyse the long-run and short-run relationship between merchandise export volume and its determinants, foreign income, relative prices and exchange rate volatility, using the techniques of cointegration and error correction. The model was estimated for Irish exports and sectoral exports SITC 0-4 and SITC 5-8 to the EU using quarterly data for the period 1978-1998. The sectoral classification corresponds to the exports of mainly indigenous Irish firms and multinationals, respectively. We find that the exchange rate volatility has no effect on the volume of trade in the short-run but a significant positive effect in the long run. This is true in the aggregate and for our sectoral classifications. We can tentatively conclude that the decline in intra-EU exchange rate volatility associated with the single currency will lead to a long-run fall in Irish exports to the EU.
ISSN:0269-2171
1465-3486
DOI:10.1080/0269217032000064053