This study examines the relationship between trade openness and exchange rate volatility. We use panel data of 52 countries and document trade openness has a negative and statistically significant effect on exchange rate volatility. The second explanatory variable considered in the model is money supply shock which is found to have a positive and statistically significant effect on exchange rate volatility. Our results survive battery of robustness checks.
Kacaribu, Febrio; Sabrina, Syahda; and Hasan, Teuku Muhammad Riefky
"DOES THE SERVICE TRADE OPENNESS MITIGATE REAL EXCHANGE RATE VOLATILITY?,"
Bulletin of Monetary Economics and Banking: Vol. 24:
2, Article 7.
Available at: https://bulletin.bmeb-bi.org/bmeb/vol24/iss2/7