International trade facilitates efficient resource allocation and economic growth but is highly sensitive to external factors such as Exchange Rate Fluctuations (ERV). ERV represents frequent and unpredictable changes in currency values that can increase transaction costs, reduce competitiveness in export markets, and discourage cross-border investments. This research investigates the relationship between ERV and International Trade in Emerging economies. The gravity model of trade model is used to analyze panel data collected from 20 emerging market countries over 2000-2022 to examine the effect of ERV on export and import flows. The results indicate a significant negative impact of exchange rate volatility on exports and imports, with exports being more sensitive to volatility. Macroeconomic stability and financial development are found to moderate the adverse effects of volatility on trade flows. These findings have important implications for policymakers in emerging economies seeking to promote international trade and mitigate the risks associated with exchange rate fluctuations.
Authors: Sindhu Ramesh, Ashok Kumar, P LATHA, Vijaya Kittu Manda
DOI: https://doi.org/10.4018/979-8-3693-9765-7.ch008
Publish Year: 2025
