Measuring the Economic Impacts of Exchange Rate Uncertainty on International Trade

The general purpose of this thesis is to explore the economic impact of the real exchange rate uncertainty on bilateral trade flows. To accomplish the objective, two types of exchange rate uncertainty measurements are  examined, different ways of constructing uncertainty measurements are explored, and a gravity model is specified and estimated. A panel data set is used spanning 1980 through 1992 for 10 developed countries: Belgium, Canada, France, Germany, Italy, Japan, Netherlands, Switzerland, United Kingdom, and United States. Econometric results indicate that the real exchange rate uncertainty has had a significant negative effect on trade over this
period.

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