One of the issues that have received considerable attention is the effect of exchange rate risk on the volume of trade. It has been argued that higher volatility of exchange rates leads to a decrease in international trade transactions. This is because most trade contracts are not for immediate delivery of goods; and since they are denominated in terms of the currency of either the importer or the exporter

thereby impairing forward markets) or for some reason they are not utilized to fully hedge exchange risk present in trade transactions.

Bill Carlson

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<p>The empirical evidence

Sat Jan 11 , 2020
has at best been inconclusive. The large majority of the empirical studies are unable to establish a systematically significant link between exchange rate variability and the volume of international trade whether on an aggregate or on a bilateral basis. Abrams (1980)