Exchange-Rate Volatility and Commodity Trade: The Case of the US and Italy

Abstract

In recent years, numerous empirical studies have estimated the role of exchange-rate uncertainty on different countries’ industry-level trade flows. These have tended to find mixed results, with the majority of industries registering no impact, and the rest split between positive and negative effects. This study extends the literature to the case of US-Italian trade, for 145 export industries and 125 import industries. Of those industries, most exhibit significant short-run responses to exchange-rate volatility, but fewer register significant long-run effects. US exports of food and imports of raw materials appear to be particularly affected by risk in the long run, while many manufactures are not.