Exchange Rate Volatility and Trade : A Meta-Regression Analysis

Many empirical studies have been done to investigate whether trade is influenced by exchange rate volatility. Conventional wisdom is that increased exchange rate volatility inhibits the growth of foreign trade.This MRA extends by 10 studies and 100 observations Pugh's and Coric (2008) meta regression. This MRA is updated with studies published to date (2012 year). Around 67 studies have investigated the effect of exchange rate variability and international trade resulting in 923 estimates. On average, exchange rate variability exerts negative effect on international trade. The conlcusion is that in the literature of exchange rate variability and trade there is presence of genuine empirical effect and not a presence for publication bias. The publication bias that appeared in the clustered robust model is perhaps due to the ten papers that were added to Pugh's and Coric MRA. They were not from the Econlit data base. Results are summarized in the following two tables