The Effects of Exchange Rate Volatility on Sri Lankan Exports: An Empirical Investigation
E. M. Ekanayake, Dasha Chatrna
This paper investigates effects of exchange rate volatility on Sri Lankan exports to its major trading partners. In this paper, we use a generalized ARCH-type model (GARCH) to generate a measure of exchange rate volatility which is then tested in a model of Sri Lankan exports. Testing sectoral trade data allows us to identify whether the effect of exchange rate volatility differs depending on the types of the goods traded. The results obtained in this paper suggest that the impact of exchange rate volatility differs between different categories of goods although it remains difficult to firmly establish the nature of the relationship.