Exchange Rate Volatility And The US Subsectoral Import Flows

In this study we investigate the effect of the real exchange rate and the exchange rate volatility on subsectoral imports of the United States from Canada, China, Germany, Japan and Mexico during the period of January 2002-December 2012. The Cointegration method and the Error Correction Model are applied to study the relationship between the subsectoral imports and its determinants. The measure of exchange rate volatility employed is a moving standard deviation. Real exchange rate is employed in the empirical study. Results indicate significant positive effects of the exchange rate volatility only for China.