The Effect of Exchange Rate Volatility on Exports

The purpose of this book was to examine the effect of real exchange rate volatility between the Canadian and US dollars on real exports from Canada to US. The study used quarterly data from 1960-2017. The GARCH (1, 1) was used to model exchange rate volatility. After finding the variables were non-stationary with no co-integration, a VAR model was used to investigate the short-run relationship in the variables using Granger causality, impulse response functions and variance decomposition estimates. The results revealed that the effect of exchange rate volatility is of mixed signs with coefficients that are not statistically significant.