Exchange rates/international Finance – Fina 4993 – Fall 2015

1. Provide a thorough and systematic literature review on whether or how or both exchange rate
volatility (fluctuations) affects imports and exports between pairs of countries. You may ignore
theoretical research papers you find, but focus on empirical papers instead.

2. In your review, you first need to explain what exchange rate volatility (EXV) is and how it is
normally calculated.

3. You then summarize what studies have been performed on what specific pairs of countries and
the empirical findings.

4. You then summarize in another section what other researchers have suggested be done or can
be done at all to have consistent empirical results or the reasons why the empirical results do not
come to the same conclusions. Be specific if the reasons provided are about methods of research,
data points, data periods, etc.

Requirement 2: [40 points] Do it yourself

1. Go to pages 60 and 61 of your textbook.

2. Work out the Excel exercise to answer questions 3, 4, and 5. However, instead of collecting data
for 24 months, you are required to extend the data to cover for 10 years. That means you should
have 10 years times 12 months or 120 observations instead of just 24 observations as mentioned
in the textbook. This exercise basically asks you to run a regression of exchange rate volatility on
imports, exports, and net exports and to provide an interpretation of your empirical findings.

Other requirements and grading criteria:

0 Your first draft should include a detailed outline of the paper, a list of references, including websites,
if any, attachments of individual contributions to the task up to that point. The draft should be in point
forms. No full sentences are needed. No spelling and grammar penalty will be applied to this first
draft. Although the final grade on the term paper depends on the quality of the final version, failure
to submit the first draft by the due date will result in a significant deduction of points from the final
version (at least an equivalent of one letter grade).

0 A full write-up of the term paper (i.e., essay writing with complete sentences, not all-bullet writing,
even though some bullets are totally acceptable) is expected in the second submission.

0 Formal use of the English language is required for the term paper. You are required to perform all
spell checks and grammar checks before submitting your work. A spelling or grammatical error in the
final version will cost you 1/2 point each up to a total of 5 points.

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