The Effect of Exchange Rate Volatility on International Trade Flow : A Meta Regression Analysis

"This paper applies meta-regression analysis (MRA) to the empirical literature. The results reveal that, though modestly, the estimated effect sizes may suffer from publication bias. Although the results show the existence of an overall authentic trade effect of ERV beyond publication bias, its size is very small and does not yield overwhelming evidence even on the sign of the effect. Most strikingly, the empirical effect is estimated with pronounced eterogeneity. Investigation of this heterogeneity reveals that the results are significantly influenced both by authors’ modelling strategies and by the contexts of their investigations. MRA evidence on the pronounced heterogeneity of the empirical findings may be instructive for policy: first, by establishing that average trade effects are not sufficiently robust to generalize across countries; and second, by suggesting the importance of hedging opportunities – hence of financial development – for trade promotion. In general, our most important advice for policy makers is that economic research does not reveal a single representative effect size."