2003 Series • No. 03–2
Research Department Working Papers
On the Trade Impact of Nominal Exchange Rate Volatility
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.