U.S. bilateral trade flows and exchange risk during the floating period

This paper tests for real exchange rate risk effects on U.S. bilateral trade flows during the floating period using several new as well as previously used risk measures. Significant negative effects occur in five of six U.S. import flows, and in two of six U.S. export flows, with one export flow showing a significant positive effect. These results are consistent with several previous findings for aggregate U.S. trade. Two risk measures using the forward exchange rate and assuming a time-varying risk premium provide marginally more significant results than the others.