This paper explores the hypothesis that high volatility of real and nominal exchange rates may be due to the fact that local currency pricing eliminates the pass-through from changes in exchange rates to consumer prices. Exchange rates may be highly volatile because in a sense they have little effect on macroeconomic variables. The paper shows the ingredients necessary to construct such an expl...

We present an empirical investigation of the hypotheses that exchange rate volatility may have an impact on both the volume and variability of trade flows by considering a broad set of industrial countries’ bilateral real trade flows over the period 1980–1998. Similar to the findings of earlier theoretical and empirical research, our first set of results shows that the impact of exchange rate u...

Exchange rate volatility, or a continuous fluctuation in the currency has been major concern recent years due to its impact on economic activities. No wonder concerns have raised regarding connection between exchange fluctuations and their effects overall economy. The motivation for study is based fact that most emerging economies experiencing inflationary tendencies are more likely experience ...

Structural shifts characterize the volatility of the Korean stock and foreign exchange markets during the 1997 Asian financial crisis. This paper employs an unrestricted bivariate GARCH-M model of stock market returns to investigate empirically the effects of daily currency depreciation on Korean stock market returns. The evidence shows that currency depreciation significantly affects stock mar...