scholarly journals Exchange Rate Uncertainty and Export Decisions in the UK

2008 ◽  
Author(s):  
David Greenaway ◽  
Richard Kneller ◽  
Xufei Zhang
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Uncertainty ◽  
Export Decisions ◽  
The Uk

scholarly journals Exchange Rate Uncertainty and Export Decisions in the UK

2010 ◽  
Vol 25 (4) ◽  
pp. 734-753 ◽  
Author(s):  
David Greenaway ◽  
Richard Kneller ◽  
Xufei Zhang
Keyword(s):  
Exchange Rate ◽  
Exchange Rate Uncertainty ◽  
Export Decisions ◽  
The Uk

The Impact of Regret on Exports

2016 ◽  
Vol 17 (2) ◽  
pp. 192-205
Author(s):  
Udo Broll ◽  
Kit Pong Wong ◽  
Peter Welzel
Keyword(s):  
Exchange Rate ◽  
Risk Premium ◽  
Optimal Allocation ◽  
Risk Averse ◽  
Exchange Rate Uncertainty ◽  
Export Decisions ◽  
Ex Post ◽  
Spot Exchange Rate ◽  
Regret Aversion ◽  
The Impact

Abstract We examine optimal production and export decisions of a firm facing exchange rate uncertainty, where the firm’s management is not only risk averse but also regret averse, i.e., is characterized by a utility function that includes disutility from having chosen ex post suboptimal alternatives. Experimental and empirical results support the view that managers tend to be regret averse. Under regret aversion a negative risk premium need not preclude the firm from exporting which would be the case if the firm were only risk averse. Exporting creates an implicit hedge against the possibility of regret when the realized spot exchange rate turns out to be high. The regret-averse firm as such has a greater ex ante incentive to export than the purely risk averse firm. Finally, we use a two-state example to illustrate that the firm optimally exports more (less) to the foreign country than in the case of pure risk aversion if the low (high) spot exchange rate is more likely to prevail. Regret aversion as such plays a crucial role in determining the firm’s optimal allocation between domestic sales and foreign exports.

Exchange-rate risk and UK-China trade: evidence from 47 industries

2014 ◽  
Vol 7 (1) ◽  
pp. 2-17 ◽  
Author(s):  
Mohsen Bahmani-Oskooee ◽  
Scott Hegerty ◽  
Ruixin Zhang
Keyword(s):  
Exchange Rate ◽  
Trade Flows ◽  
Exchange Rate Risk ◽  
Exchange Rate Uncertainty ◽  
Content Type ◽  
Underlying Theory ◽  
Rate Risk ◽  
Long Run ◽  
The Uk ◽  
Trade Share

Purpose – Recent years have seen a rapid expansion of studies that examine the effects of exchange-rate risk on bilateral exports and imports for specific industries. Since the underlying theory is ambiguous, each case must be studied individually. This paper considers British trade with China, for 47 types of product, over the period from 1978 to 2010. Consistent with the underlying theory, cointegration analysis shows that most industries register no effect due to volatility in the long run, while some trade flows are reduced and a handful are even increased. An analysis of industry characteristics suggests that while the type of good might play little role on an industry's specific results, a product's trade share does. This is the case for UK imports of Chinese goods, perhaps because large Chinese exporters are able to successfully hedge against exchange-rate risk. The paper aims to discuss these issues. Design/methodology/approach – The method is based on bounds testing approach to cointegration and error-correction modeling. Findings – The paper arrives at two key conclusions. First, as has been shown previously for other country pairs, most industries demonstrate no long-run response to exchange-rate volatility. A fraction of industries are affected, and most of these effects are negative. Research limitations/implications – This research pertains to the case of industry trade between the UK and China only. Practical implications – The paper identifies industries that are affected by exchange rate uncertainty. Originality/value – No study has looked at the impact of exchange rate uncertainty on the trade flows between China and the UK at commodity level.

Exchange rate bands of inaction and hysteresis in EU exports to the global economy

2019 ◽  
Vol 46 (2) ◽  
pp. 335-355 ◽  
Author(s):  
Ansgar Belke ◽  
Dominik Kronen
Keyword(s):  
Exchange Rate ◽  
Exchange Rates ◽  
Export Performance ◽  
Real Exchange Rates ◽  
Policy Uncertainty ◽  
Exchange Rate Uncertainty ◽  
Content Type ◽  
The Usa ◽  
The Uk ◽  
The Eu

Purpose The purpose of this paper is to estimate the effect of policy and exchange rate uncertainty shocks on EU countries’ exports to the world economy. The authors examine the performance of the four biggest economies, namely Germany, France, Italy and the UK, under policy and exchange rate uncertainty in exports to some of the most important global export destinations (the USA, Japan, Brazil, Russia and China). Design/methodology/approach For this purpose, the authors apply a non-linear model, where suddenly strong spurts of exports occur when changes of the exchange rate go beyond a zone of inaction, which the authors call “play” area – analogous to mechanical play. The authors implement an algorithm describing path-dependent play hysteresis into a regression framework. The hysteretic impact of real exchange rates on exports is estimated based on the period from 1995M1 to 2015M12. Findings Looking at some of the main export destinations of the selected EU member countries, the USA, Japan and some of the members of BRICS (Brazil, Russia and China), the authors identify significant hysteretic effects for a large part of the EU member countries’ exports. The authors find that their export activity is characterized by “bands of inaction” with respect to changes in the real exchange. To check for robustness, the authors estimate export equations for limited samples: excluding the recent financial crisis and excluding the period up to the burst of the dotcom bubble and September 11. In addition, the authors employ an economic policy uncertainty variable and an exchange rate uncertainty variable as determinants of the width of the area of weak reaction of exports. Research limitations/implications Overall, the authors find that those specifications which take uncertainty into account display the highest goodness of fit, with economic policy uncertainty dominating exchange rate uncertainty. In other words, the option value of waiting dominates the real exchange rate effect on the EU member countries’ exports. Practical implications The existence of “bands of inaction” (called “play”) in EU member countries’ exports should lead to a more objective discussion of peaks and troughs in those countries’ real exchange rates and, more specifically, of the relevance of internal and external devaluation and other indicators to gain international competitiveness on exports in political debates. If policy and/or exchange rate uncertainty are diminished, one may expect an earlier boost in exports, if the home currency is devaluing in real terms. Social implications The results are useful as arguments in the debate about exchange rate pain threshold vs export triggers. Originality/value The authors focus on the export performance of the four biggest economies in the European Union, namely Germany, France, Italy and the UK. The authors examine their respective export performance, as an innovation, under policy and exchange rate uncertainty and, for this purpose, look at some of the most important global export destinations (the USA, Japan and the BRICS (Brazil, Russia and China)). The authors do so, also as an innovation, by differentiating between intervals of weak and strong reaction of their exports to real exchange rate changes.

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