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This paper examines the extent to which exchange rate volatility (ERV) is crucial for small island economies. These economies by their very nature and size tend to be net importers and highly dependent on trade for their economic survival. The island of Mauritius is used as a case study.

A GARCH model has been utilized using yearly data for the period 1993–2022. The ARDL bounds cointegration approach has been used to determine the long run relationship between exchange rate volatility and the performance of exports. The ECM-ARDL model has been used to estimate the short-run relationships, that is the speed of adjustments between the variables under consideration.

The findings reveal that exchange rate volatility has a positive and significant effect on exports in the short run as well as in the long run. The study also finds out that export has a long-term relationship with world GDP per capita. Both the presence and degree of exchange rate volatility are important aspects for consideration in policy making.

The literature gap that this study attempts to close is one related to global impacts within the recent time horizon. Recently, numerous important events shaped the financial and economic landscape globally, including but not limited to the financial crisis of 2008 and the COVID-19 pandemic in 2019. Both these events stressed the global volume of trade and the exchange rate markets, and these events affects small islands comparatively more given their heavy dependence on international trade for economic development, albeit economic survival.

Understanding which market to invest in for a well-diversified portfolio is fundamental in economies that are highly vulnerable to fluctuations in exchange rates. Extant literature that has considered phenomenon hardly juxtapose the markets. The purpose of this study is to examine the effects of exchange rate volatility on the Stock and Real Estate market of South Africa. The essence is to determine whether the fluctuations in the exchange rate influence the markets prices differently.

The Generalised Autoregressive Conditional Heteroskedasticity [GARCH (1.1)] model was used in establishing the effect of exchange rate volatility on both markets. This study used monthly South African data between 2000 and 2020.

The results of this study showed that increased exchange rate volatility increases stock market volatility but decreases real-estate market volatility, both of which revealed weak influences from the exchange rates volatility.

This study has implication for policy in using the exchange rate as a policy tool to attract foreign portfolio investment. The weak volatility transmission from the exchange rate market to the stock and real estate market indicates that there is prospect for foreign investors to diversify their investments in these two markets.

This study investigated which of the assets market, stock or housing market do better in volatile exchange rate conditions in South Africa.

The authors analyze the relationship between exchange rate fluctuations of a number of major currencies and its impact on US stock market returns, as proxied by the S&P 500. Many studies have explored this topic since the early 1970s with varied results and with no evidence that clearly explains the relationship between exchange rates and stock market returns. This study takes a different look at this hypothesis and investigates the pairwise relationship between various exchange rates and the United States stock market returns (S&P 500 INDEX) from January 2000 to December 2019.

The authors test the data for unit roots using Phillip-Perron method. They use Johansen cointegration model to determine whether returns on S&P 500 are integrated with S&P 500. They use the VAR/VECM analysis to test whether there are any interdependencies between exchange rates and stock market return. Finally, they use various GARCH models, including the EGARCH and TGARCH models, to determine whether there exist volatility spillovers from exchange rate fluctuations in various markets to the volatility in the US stock market.

Using GARCH modeling, the authors find volatility in Australian dollar, Canadian dollar and the euro impact market return, and the volatility of Australian dollars and euro spills over to the volatility of S&P 500. They also find that the spillover is asymmetric for Australian dollars.

One of the limitations could be that the authors use different bivariate GARCH models rather than the MV-GARCH models. For future project(s), they plan to do this analysis from the perspective of a European Union or a British investor and use returns in those markets to see the impact of exchange rates on those markets. It would be interesting to know how the relationship will change during periods of financial crises. This could be achieved by employing structural break methodology.

Many studies have explored the relation between stock market returns and exchange rates since the early 1970s with varied results and with no evidence that clearly explains the relationship between exchange rates and stock market returns. This paper contributes by adding to the existing literature on impact of exchange rate on stock returns and by providing a detailed and different empirical analysis to support the results.

Exchange rate volatility is an important factor affecting investors and policymakers. This study aims to examine the impact of uncertainties, in terms of changes in economic policy, monetary policy and global financial markets, on exchange rate volatility.

The study uses the GARCH (1,1) univariate model to calculate exchange rate volatility. Economic and monetary policy uncertainties are measured using news-based indices, while global financial market volatility is measured using the implied volatility index. Panel autoregressive distributed lag modeling is used to analyze the impact of uncertainty on exchange rate volatility in the short and long run. The sample consists of 26 developed and emerging markets from 2005 to 2020.

The study finds that economic policy uncertainty significantly increases exchange rate volatility. Similarly, global financial market uncertainty leads to increased exchange rate volatility. The effect of US monetary policy uncertainty reduces exchange rate volatility.

This research contributes to the existing literature on exchange rate fluctuations by examining the impact of uncertainties on exchange rate volatility. The study uses novel news-based indices for measuring economic and monetary policy uncertainties and includes a broader sample of emerging and advanced markets. The findings have important implications for investors and policymakers.

This study aims to analyze the volatility spillover effects of crude oil, gold price, interest rate (yield) and the exchange rate (USD (United States Dollar)/INR (Indian National Rupee)) on inflation volatility in India.

This study uses the multivariate Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models (Baba, Engle, Kraft and Kroner [BEKK]-GARCH and dynamic conditional correlation [DCC]-GARCH) to examine the volatility spillover effect of macroeconomic indicators and strategic commodities on inflation in India. The monthly data are collected from January 2000 till December 2020 for the crude oil price, gold price, interest rate (5-year Indian bond yield), exchange rate (USD/INR) and inflation (wholesale price index [WPI] and consumer price index [CPI]).

In BEKK-GARCH, the results reveal that crude oil price volatility has a long time spillover effect on inflation (WPI). Furthermore, no significant short-term volatility effect exists from crude oil market to inflation (WPI). However, the short-term volatility effect exists from crude oil to inflation while considering CPI as inflation. Gold price volatility has a bidirectional and negative spillover effect on inflation in the case of WPI. However, there is no price volatility spillover effect from gold to inflation in the case of CPI. The price volatility in the exchange rate also has a negative spillover effect on inflation (but only on CPI). Furthermore, volatility of interest rates has no spillover effect on inflation in WPI or CPI. In DCC-GARCH, a short-term volatility impact from all four macroeconomic indicators to inflation is found. Only crude oil and exchange rate have long-term volatility effect on inflation (CPI).

In an economy, inflation management is an essential task. The findings of the current study can be beneficial in this endeavor. The knowledge of the volatility spillover effect of all the four markets undertaken in the study can be significantly helpful in inflation management, especially for inflation-targeting policy.

It is observed that no other study has addressed this issue. We do not find any other research which studies the volatility spillover effect of gold, crude oil, interest rate and exchange rate on the inflation volatility. The current study is novel with a significant contribution to the vast knowledge in this context.

The aim the study is to explore the impact of real exchange rate volatility and other macroeconomic variable such as price of import, industrial production and real exchange rate on 45 import commodities, considering global financial crisis period on India's import from the US. The empirical analysis at disaggregate level of import indicates the existence of both short-run and long-run effect in one-third importing commodities. The results show both positive and negative effect and causality among variables.

The study uses E-GARCH model to gage the real exchange rate volatility, an autoregressive distributive lag (ARDL) bound test technique to discover the adequate short- and long-run relationships and Toda-Yamamoto causality method to analyze the causality among variables. The study uses the time period from 2002:M09 to 2019:M06.

The empirical analysis at disaggregate level of import indicates the existence of both short-run and long-run effect in one-third importing commodities. The results show both positive and negative effects and causality among variables.

The finding of the study suggests that macroeconomic variables have significant role and could be important to undertake the small and medium scale industries in policymaking. Government may need to make decision for micro, small and medium enterprises (MSMEs) as their performance can bring change in the trade to compete globally by increasing and controlling the price of the import and defending the domestic competitiveness.

The study uses additional variable namely price of import and includes the global financial crisis period to measure dampening effect on each commodity by using robust econometric technique in context of emerging nation like India.

Recent literature has shifted to examining whether exchange rate volatility symmetrically or asymmetrically affects the trade flows. This study aims to extend the existing literature by examining the effects of extremely large to extremely small changes in exchange rate volatility series on the US imports from Brazil, India, Mexico and South Africa.

For examining the effects of extreme changes, multiple threshold nonlinear autoregressive distributed lag (MTNARDL) model is used and the exchange rate volatility series is divided into quintiles and deciles. It helps to examine the effects of each quintile/decile of exchange rate volatility series on the US imports.

Findings indicate that the effects of extremely large changes in the exchange rate volatility series significantly differ from the effects of extremely small changes in the exchange rate volatility series on the US imports.

The findings of this study are very important. These findings help to consider the effect of extreme changes before devising policies related to trade flows.

This study mainly focuses on US imports from Brazil, India, Mexico and South Africa. In addition, this study extends the existing literature by using a novel methodology called MTNARDL model.

The purpose of this study is to examine the factors of exchange rate volatility from the macroeconomic perspective for four neighbouring ASEAN economies.

This study has scrutinised the link between macroeconomic factors and exchange rate volatility in both the short and the long run by applying econometrics techniques.

This study further suggests the link between macroeconomic factors and exchange rate volatility in both the short and the long run for the selected economies. The empirical results, however, indicate that a set of common factors seems to influence the exchange rate volatility, whereby the stock market is a great influence commonly found across countries. The Indonesian rupiah seems to be the most sensitive to the innovations in macroeconomic factors, while the Singapore dollar is the least.

The macroeconomic factors are believed to be the forces behind exchange rate volatility through the presumable rigidities of their exchange rates, resulting from the managed float exchange rate system adopted by those countries. Their capital markets are vital in maintaining exchange rate stability, hence suggesting the imperative role of respective authorities and market players in managing a viable capital market.

Little attention has been given to developing countries' experiment with their exchange rate systems due to their presumed rigid volatility. This study adopts a more sophisticated approach in measuring the volatility of the exchange rate and examines the underlying factors of exchange rate volatility instead of the level of exchange rate.

Since the last review article by McKenzie, the literature has experienced a surge in the number of empirical articles. These new contributions, coupled with those that were overlooked by McKenzie, set the stage for this review. Many of the recent studies have been empirical in nature and these deserve specific attention. Thus, this paper aims to survey and review all of the studies by paying attention to the attributes outlined in the text.

This paper examines the vast empirical literature, up to 2005, to assess the main trends in modeling and estimating these trade flows at the aggregate, bilateral, and sectoral levels.

The increase in exchange‐rate volatility since 1973 has had indeterminate effects on international export and import flows. Although it can be assumed that an increase in risk may lead to a reduction in economic activity, the theoretical literature provides justifications for positive or insignificant effects as well. Similar results have been found in empirical tests. While modeling techniques have evolved over time to incorporate new developments in econometric analysis, no single measure of exchange‐rate volatility has dominated the literature.

An argument put forward by the opponents of the floating exchange rates is that such rates introduce uncertainty into the foreign exchange market, which could deter trade flows. However, a theoretical argument is put forward by some to show that uncertainty could also boost trade flows if traders increase their trade volume to offset any decrease in future revenue due to exchange rate volatility. The empirical literature reviewed in this paper supports both views.

The purpose of this paper is to explore the impact of exchange rate volatility at sectoral level on the exports trade of Pakistan. All the sectors involved in the export trade (proposed by the State Bank of Pakistan, by commodity), were used to study this relationship at a more minute level.

Quarterly data regarding research were collected over the period 2003 to 2010 from databases of State Bank of Pakistan and International Monetary Fund financial statistics. The bound testing approach proposed by Pesaran et al., was used to study the relationship between sectoral export and exchange rate volatility, while augmented Dickey Fuller (ADF) and Phillips Perron tests were used to test the unit root of series and GARCH,proposed by Bollerslev, was used to study exchange rate volatility.

The results show that exports are negatively influenced by exchange rate volatility and relative prices while positively affected by foreign income. This relationship holds for all sectors where bound testing revealed the existence of long‐ run relationship, although some equations results were not statistically significant.

The paper's findings can be used to form such policies which result in a stabilized and competitive exchange rate, so that Pakistan's exports can be increased.

Previous studies have been conducted on aggregated data set for exports in the Pakistani context, which hinders pertinent information; however this information is possible by studying disaggregated data. The paper fills a research gap by taking sectoral level data, to divulge the behavior of individual sectors against exchange rate volatility.