The Study Of The Impact Of Volatility Of Exchange Rate To Intra-Regional Trade In CAFTA

In the 1990s with the monetary crisis occurring frequently and the impact on trade between the members of CAFTA, the member countries begin to realize the importance of research on the relationships between exchange rate volatility and international trade. The research of exchange rate volatility turned to the impact of floating exchange rate system on international trade, majority of scholars supposed, the frequent exchange rate volatility under the floating exchange rate system will definitely cause international trade to be reduced. International trade, which is regarded as the important link of promoting the economy of countries around world, its reduction will bring the countries adverse consequences and, especially to the ones which have low independence on international trade, it may make them disastrous. However, during the past tens of years, many scholars began to do caculating works on the exchange rate volatility. On the base of different existing exchange rate theories, they researched exchange rate volatility's influence on international trade of countries and some of them even obtained a detailed number for it. The empirical analysis from scholars had also demonstrated some confusing results. The influence of exchange rate volatility on international trade is not definitely negative. Sometimes it didn't show remarkably but sometimes showed positive effect. This thesis did relevant expatiations about the exchange rate theories concerning international trade and then analysed the evolution of CAFTA member countries and their foreign trade with two divisions between China and ASEAN. In the next chapter, this thesis gave elaborations on characteristics on the development of the trade in CAFTA and then did empirical analysis to the impact of exchange rate volatility on CAFTA intra-regional trade with the econometric methods. At the end of thesis, there is a primary conclusion which is impact of fluctuation of exchange rate is most remarkable and, from the viewpoint of cumulative effect, the volatility in the term of currency devaluation has positive effect on CAFTA intra-regional export but has negative effect on intra-regional import, importers averse more from exchange rate risk. Following, some proposals of policy are given with CAFTA exsiting situation.