Why you should use high frequency data to test the impact of exchange rate on trade

ABSTRACT

This study suggests that testing the impact of exchange rate on trade should be done using high-frequency data. Using different data frequencies for identical periods and specifications between the US and Canada, we show that low-frequency data might suppress and distort the evidence of the impact of exchange rate on trade in the short run and the long run.

KEYWORDS:

• Data frequency
• exchange rate and trade
• J-curve theory
• ARDL co-integration
• US–Canada trade

JEL CLASSIFICATION:

• F14
• C32

Disclosure statement

No potential conflict of interest was reported by the authors.