Uncertainty over Exchange Rates and Exports

Author Name MORIKAWA Masayuki  (Vice Chairman & Vice President, RIETI)
Creation Date/NO. August 2015 15-J-051
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This paper, using a quarterly firm-level survey data during the last decade, analyzes the time-series property of the exchange rate uncertainty and its relationship with exports. Dispersion of firms' expected exchange rate is used as a proxy for uncertainty. Major findings are as follows. First, uncertainty over exchange rates was enhanced after the Lehman Brothers collapse and after the announcement of the recent quantitative and qualitative monetary easing policy. Second, dispersion of expected exchange rates has a positive relationship with the volatility of the past exchange rates, but the dispersion does not have a predictive power over the future exchange rate volatility. Third, expected exchange rates are more dispersed among small and medium-sized enterprises (SMEs) than for large firms. Fourth, we detect some evidence that uncertainty over exchange rates has a negative effect on exports. These findings suggest the importance of international cooperation to stabilize exchange rates and the potential role of market intervention when exchange rate uncertainty is enhanced.

The English version of this paper is 16-E-010.