Exchange rate variability and China's exports

This paper estimates the impact of exchange rate variability on total expor ts and exports of China by SITC category. Exchange rate variability is esti mated by the conditional variance of the real effective exchange rate index from an autoregressive conditional heteroscedastic model. Test procedures that allow for multiple structural breaks are used to examine the stationar ity property of variables and to test cointegration. Estimation results sho w that exchange rate variability has a long-run negative effect on total ex ports, exports of manufactured goods, and exports of mineral fuels. They su pport the hypothesis that exchange rate uncertainty impedes trade in China. (C) 2000 Academic Press.