Exchange rate volatility and exports: the case of Ireland

Abstract

We use the techniques of cointegration and error correction models to estimate long-run and short-run export demand functions for Ireland using quarterly data for the 1979-93 period. We consider three determinants of exports: foreign income, relative prices, and exchange rate volatility. Our results indicate that exports depend significantly on foreign income and relative prices, in particular in the long run. Exchange rate uncertainty proxied by exchange rate volatility appears to depress export volume only in the short run according to our estimated error correction model.