Exchange rate volatility impact on Russia's foreign trade considering EAEU membership
32 Pages Posted: 9 Aug 2022
Date Written: July 26, 2022
In this study, we have attempted a broad review of the literature examining the impact of exchange rate volatility on trade volume. We show that early estimates suggesting a significant increase in trade among countries in currency unions are flawed, and are due to a number of reasons related to the endogeneity of the status of currency unions and the presence of trends in regression variables.
One section is devoted to a review of the literature on the general problem of exchange rate effects on trade; it considers an extensive class of models describing consumer demand for imported goods. This is followed by a review of empirical studies that examine, among other things, the difference in the estimation of equations for the "small open economy" and "large open economy" cases. The practical part of the paper assesses the impact of exchange rate volatility on trade volume using panel data for 214 countries of the world, using a proxy variable for the status of currency unions.
Keywords: Eurasian economic union, integration policy, tariff and non-tariff barriers, exchange volatility, international trade, import demand model, Rotterdam demand model, "almost ideal demand model",
JEL Classification: E00, E63, F33, F45
Suggested Citation: Suggested Citation