Exchange rate volatility and the United States exports: evidence from Canada and Japan

This paper investigates the influence of exchange rate volatility on the real exports of the United States to Canada and Japan during the current flexible exchange rate period (1974-1998). The Johansen multivariate cointegration method and the constrained error correction (general-to-specific) method are applied to study the relationship between real exports and its determinants (including exchange rate volatility). Conditional variance from the GARCH(1,1) model is applied as exchange rate volatility. Both nominal and real exchange rates are employed in the empirical study. Results indicate a significant effect of the exchange rate volatility on real exports. These exchange rate volatility effects are mostly negative. J. Japanese Int. Economies19 (1) (2005) 51-71.