Exchange-rate variability and U.S.-French trade flows: evidence from industry data

Recent studies have greatly expanded the literature on the effects of exchange-rate volatility on industry-level bilateral trade flows. In this study, we examine the case of the USA and France, applying cointegration analysis to a set of 146 US export and 115 US import industries. We find that the majority of industries show little or no relationship between risk and trade volumes, but that small industries – particularly for exports – show more sensitivity than do large ones. A disproportionate share of industries respond positively to increased volatility, particularly among US importers, suggesting the presence of "risk loving" behavior.