Publication:
Over the Hedge : Exchange Rate Volatility, Commodity Price Correlations, and the Structure of Trade

Simple item page
dc.contributor.authorRaddatz, Claudio
dc.date.accessioned2012-03-19T18:00:57Z
dc.date.available2012-03-19T18:00:57Z
dc.date.issued2011-03-01
dc.description.abstractA long empirical literature has examined the idea that, in the absence of hedging mechanisms, currency risk should have an adverse effect on the export volumes of risk averse exporters. But there are no clear conclusions from this literature, and the current consensus seems to be that there is at most a weak negative effect of exchange rate volatility on aggregate trade flows. However, most of this literature examines the impact of exchange rate volatility on aggregate trade flows, implicitly assuming a uniform impact of this volatility on exporters across sectors. This paper explots the fact that, if exchange rate volatility is detrimental for trade, firms exporting goods that offer a natural hedge against exchange rate fluctuations -- i.e. those whose international price is negatively correlated with the nominal exchange rate of the country where they operate -- should be relatively benefited in environments of high exchange rate volatility, and capture a larger share of the country's export basket. This hypothesis is tested using detailed data on the composition of trade of 132 countries at 4-digit SITC level. The results show that the commodities that offer natural hedge capture a larger share of a country's export basket when the exchange rate is volatile, but there is only weak evidence that the availability of financial derivatives to hedge currency risk reduces the importance of a sector's natural hedge.en
dc.identifierhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110315085110
dc.identifier.doi10.1596/1813-9450-5590
dc.identifier.urihttps://hdl.handle.net/10986/3357
dc.languageEnglish
dc.relation.ispartofseriesPaper is funded by the Knowledge for Change Program (KCP),Policy Research working paper ; no. WPS 5590
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectABSOLUTE VALUE
dc.subjectADVERSE EFFECT
dc.subjectANCHOR CURRENCY
dc.subjectANNUAL GROWTH
dc.subjectAVERAGE EXCHANGE RATE
dc.subjectBARRIER
dc.subjectBILATERAL EXCHANGE RATE
dc.subjectBILATERAL EXCHANGE RATES
dc.subjectBILATERAL TRADE
dc.subjectCAPITAL INTENSITY
dc.subjectCENTRAL BANKS
dc.subjectCOMMODITIES
dc.subjectCOMMODITY
dc.subjectCOMMODITY EXPORTS
dc.subjectCOMMODITY PRICE
dc.subjectCOMMON CURRENCIES
dc.subjectCOMPARATIVE ADVANTAGE
dc.subjectCOUNTRY FIXED EFFECTS
dc.subjectCURRENCY
dc.subjectCURRENCY HEDGING
dc.subjectCURRENCY RISK
dc.subjectCURRENCY UNION
dc.subjectCURRENCY UNIONS
dc.subjectDATA AVAILABILITY
dc.subjectDEBT
dc.subjectDEGREE OF RISK
dc.subjectDEPENDENT VARIABLE
dc.subjectDEPRECIATIONS
dc.subjectDERIVATIVE
dc.subjectDERIVATIVE MARKETS
dc.subjectDERIVATIVES MARKET
dc.subjectDERIVATIVES MARKETS
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPMENT ECONOMICS
dc.subjectDEVELOPMENT OF EXCHANGE
dc.subjectDEVELOPMENT POLICY
dc.subjectDOLLAR DEBT
dc.subjectDOLLAR EXCHANGE RATE
dc.subjectDOMESTIC PRICES
dc.subjectECONOMETRICS
dc.subjectECONOMIC GROWTH
dc.subjectECONOMIC POLICY
dc.subjectECONOMIC RESEARCH
dc.subjectECONOMIC SIZE
dc.subjectECONOMIC SURVEYS
dc.subjectELASTICITY
dc.subjectELASTICITY OF SUBSTITUTION
dc.subjectEMERGING CURRENCY BLOCS
dc.subjectEQUATIONS
dc.subjectEQUILIBRIUM
dc.subjectEXCHANGE RATE
dc.subjectEXCHANGE RATE ARRANGEMENTS
dc.subjectEXCHANGE RATE DATA
dc.subjectEXCHANGE RATE FLUCTUATIONS
dc.subjectEXCHANGE RATE MOVEMENTS
dc.subjectEXCHANGE RATE REGIME
dc.subjectEXCHANGE RATE REGIMES
dc.subjectEXCHANGE RATE RISK
dc.subjectEXCHANGE RATE RISKS
dc.subjectEXCHANGE RATE UNCERTAINTY
dc.subjectEXCHANGE RATE VOLATILITY
dc.subjectEXCHANGE RATES
dc.subjectEXPLANATORY VARIABLE
dc.subjectEXPORT SHARE
dc.subjectEXPORT SHARES
dc.subjectEXPORT VOLUMES
dc.subjectEXPORTER
dc.subjectEXPORTERS
dc.subjectEXPOSURE
dc.subjectFINANCIAL DERIVATIVES
dc.subjectFINANCIAL SECTOR
dc.subjectFINANCIAL SUPPORT
dc.subjectFIXED EXCHANGE RATES
dc.subjectFLEXIBLE EXCHANGE RATES
dc.subjectFOREIGN EXCHANGE
dc.subjectFOREIGN EXCHANGE RATE
dc.subjectFUTURE RESEARCH
dc.subjectFUTURES
dc.subjectGDP
dc.subjectGDP PER CAPITA
dc.subjectGLOBAL EXPORT
dc.subjectGLOBAL EXPORTS
dc.subjectGLOBAL TRADE
dc.subjectGRAVITY MODELS
dc.subjectGROWTH RATE
dc.subjectGROWTH RATES
dc.subjectHARD PEGS
dc.subjectHEDGES
dc.subjectHEDGING INSTRUMENTS
dc.subjectHISTORY OF EXCHANGE RATE
dc.subjectHOME COUNTRY
dc.subjectHOMOGENEOUS GOODS
dc.subjectHUMAN CAPITAL
dc.subjectIMPORT
dc.subjectIMPORT PRICE
dc.subjectIMPORTS
dc.subjectINCOME
dc.subjectINCOME LEVELS
dc.subjectINSTRUMENT
dc.subjectINSTRUMENTAL VARIABLE
dc.subjectINSTRUMENTAL VARIABLES
dc.subjectINTERNATIONAL BANK
dc.subjectINTERNATIONAL COMPETITIVENESS
dc.subjectINTERNATIONAL ECONOMICS
dc.subjectINTERNATIONAL FINANCIAL STATISTICS
dc.subjectINTERNATIONAL MARKETS
dc.subjectINTERNATIONAL MONETARY FUND
dc.subjectINTERNATIONAL PRICE
dc.subjectINTERNATIONAL PRICES
dc.subjectINTERNATIONAL SETTLEMENTS
dc.subjectINTERNATIONAL TRADE
dc.subjectLEVY
dc.subjectLIBERALIZATION
dc.subjectLIQUIDITY
dc.subjectLOCAL CURRENCY
dc.subjectLONG RUN EQUILIBRIUM
dc.subjectMACROECONOMIC VOLATILITY
dc.subjectMACROECONOMICS
dc.subjectMAJOR CURRENCIES
dc.subjectMARKET DATA
dc.subjectMARKET FORCES
dc.subjectMONETARY FUND
dc.subjectMULTILATERAL TRADE
dc.subjectNOMINAL EXCHANGE RATE
dc.subjectNOMINAL EXCHANGE RATES
dc.subjectOPEN COUNTRIES
dc.subjectOUTPUT
dc.subjectOUTPUT PER CAPITA
dc.subjectPEG
dc.subjectPEGS
dc.subjectPOLITICAL ECONOMY
dc.subjectPRICE INDEX
dc.subjectPRICE INDEXES
dc.subjectPRICE MOVEMENTS
dc.subjectPRICE OF GOOD
dc.subjectPRICE OF GOODS
dc.subjectPRICE SERIES
dc.subjectPRICE VOLATILITY
dc.subjectPRIVATE CREDIT
dc.subjectREAL COSTS
dc.subjectREAL EXCHANGE RATE
dc.subjectREAL EXCHANGE RATES
dc.subjectREFERENCE CURRENCY
dc.subjectRELATIVE PRICE
dc.subjectRELATIVE PRICES
dc.subjectRISK AVERSE
dc.subjectSTANDARD DEVIATION
dc.subjectSTANDARD DEVIATIONS
dc.subjectSTEADY STATE
dc.subjectSTRUCTURAL REFORMS
dc.subjectSWAPS
dc.subjectTEST OF EQUALITY
dc.subjectTOTAL EXPORT
dc.subjectTOTAL EXPORTS
dc.subjectTRADE DATA
dc.subjectTRADE IMPACT
dc.subjectTRADE LIBERALIZATION
dc.subjectTRADE OPENNESS
dc.subjectTRADE PATTERN
dc.subjectTRADE PATTERNS
dc.subjectTRADE SHARE
dc.subjectTRADE SHARES
dc.subjectTRADING
dc.subjectTRADING PARTNER
dc.subjectTRADING PARTNERS
dc.subjectTRANSPORTATION COST
dc.subjectTRUST FUND
dc.subjectTURNOVER
dc.subjectUNCERTAINTY
dc.subjectUNDERDEVELOPED COUNTRIES
dc.subjectVALUE INDEXES
dc.subjectVOLATILE ENVIRONMENTS
dc.subjectVOLATILE EXCHANGE RATES
dc.subjectVOLATILITIES
dc.subjectVOLATILITY
dc.subjectVOLUME OF TRADE
dc.subjectWEIGHTS
dc.subjectWORLD DEVELOPMENT INDICATORS
dc.subjectWORLD PRICE
dc.subjectWORLD TRADE
dc.titleOver the Hedge : Exchange Rate Volatility, Commodity Price Correlations, and the Structure of Tradeen
dspace.entity.typePublication
okr.crossref.titleOver the hedge: Exchange rate volatility, commodity price correlations, and the structure of trade
okr.date.disclosure2011-03-01
okr.date.doiregistration2025-04-10T11:31:32.617830Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.docurlhttp://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20110315085110
okr.guid549291468149670939
okr.identifier.doi10.1596/1813-9450-5590
okr.identifier.externaldocumentum000158349_20110315085110
okr.identifier.internaldocumentum13910605
okr.identifier.reportWPS5590
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2011/03/15/000158349_20110315085110/Rendered/PDF/WPS5590.pdfen
okr.region.administrativeThe World Region
okr.region.administrativeThe World Region
okr.sectorGeneral education sector,General finance sector
okr.sectorEducation,Finance
okr.unitDevelopment Research Group (DECRG)
okr.unitPartnerships
okr.unitCapacity Building (DECPO)
okr.unitDECRG: Macroeconomics & Growth (DECMG)
okr.volume1 of 1
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
Files
Original bundle
Now showing 1 - 2 of 2
Thumbnail Image
Name:
WPS5590.pdf
Size:
1.6 MB
Format:
Adobe Portable Document Format
Download
No Thumbnail Available
Name:
WPS5590.txt
Size:
170.81 KB
Format:
Plain Text
Download
License bundle
Now showing 1 - 1 of 1
No Thumbnail Available
Name:
license.txt
Size:
1.71 KB
Format:
Plain Text
Description:
Download
Collections
Policy Research Working Papers