engleski

Real Exchange Rate Volatility Effect on Croatian Export Variations

The impact of exchange rate fluctuatins on merchandise volume has been a major issue for policymarkers and professional economists since the breakdown of the Bretton Woods system. Nowadays economists agree that exchange rates of major currencies have a high degree of volatility and uncertainty. However, they do not agree on the economic consequences of exchange rate volatility. The overall empirical evidence is ambiguous, depicting negative, positive, or an inconclusive relationship between exchange rate volatility and volume of trade. The results are sensitive to the choices of the sample period, model specification, volatility measures and countries. We analysed the long-run and the short-run relationships between merchandise export volume and its determinants namely ; foreign income, real exchange rate and volatility of real exchange rate using techniques of cointegration and error correction. It showed that the exchange rate volatility has no effect on the volume of trade in the long run.

financial markets ; exchange rate ; fiscal policy ; monetary policy ; historic volatility ; exchange risk ; vector error-correction

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