International trade and the risk in bilateral exchange rates *

• 成果类型: Article
• 署名作者: Hassan, Ramin; Loualiche, Erik; Pecora, Alexandre R.; Ward, Colin
• 署名单位: Cornerstone Research; University of Minnesota System; University of Minnesota Twin Cities; Virginia Polytechnic Institute & State University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2023.103711
• 发表日期: 2023
• 关键词: International finance; Exchange rates; international trade

摘要

Exchange rate volatility falls after a trade deal, driven by a decline in the systematic component of risk. The average trade deal increases trade by 50 percent over five years, reducing systematic risk by a third of a standard deviation across countries. We examine this connection in an Armington model where the structure of trade networks determines the risk in exchange rates. We estimate our model to current data and find i) that countries at the periphery of the world trade network benefit the most from lower trade barriers and ii) that a counterfactual experiment of a trade war between the US and China shows a global increase in currency risk, with effects concentrated among peripheral countries. (c) 2023 Elsevier B.V. All rights reserved.