On the Trade Impact of Nominal Exchange Rate Volatility On the Trade Impact of Nominal Exchange Rate Volatility

By Silvana Tenreyro

What is the effect of nominal exchange rate variability on trade? I argue that the methods conventionally used to answer this perennial question are plagued by a variety of sources of systematic bias. I propose a novel approach that simultaneously addresses all of these biases, and present new estimates from a broad sample of countries from 1970 to 1997. The answer to the question is: Not much.

This paper was revised in April 2004.

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